A condensed edition of an article by Mark O"Bryne (An authority out of Ireland on Silver).
Precious metals and particularly silver, remain the most undervalued of all commodities. Silver will surpass $20 per ounze in 2007, $48.70 per ounce before 20012 and $130 an oz in the next 8 years. The reasons for this bullish outlook on silver are due to continuing and increasing global geopolitical risks; silver's historic role as money and store of value; the declining and very small supply of silver; significant industrial demand and most importantly increasing investment demand.
Gold and silver have been used as money for longer periods than paper currencies. Silver has been used in more regions and countries, and for longer periods of time than gold. Nobel Laureate Milton Freidman said," The major monetary metal in history is silver, not gold."
In 1900 there were 12 billion oz. of silver in the world. By 1990 that figure had been reduced to around 2.2 billion oz. Today that figure has fallen to about 300 million oz in above ground refined silver. It is estimated that 95% of the silver ever mined has been consumed by the global photography, technology, medical, defense, and electronics industries. This silver has been cunsumed and not recoverable and is gone for reclaimability.
CBS Marketwatch published an article in March 2007 entitled "Silver may shine brightest in metals", in which Keven Kerr wrote that "Due to current supply/demand trends, the amount of silver above ground is projected to shrink to a crirically low level by 2010. As supply shrinks, prices will keep rising steadily to new highs. Many iin the investment world are unaware of this part of silver's story. Industrial demand has been outstripping mining supply for the past 15 years, driving above ground supply to historically low levels. "Silver production was flat this year and is expected to be flat again next year. The U.S. governments stockpile is all gone, and sales from other government resources of stockpiles are decllining too. Refined silver stocks are at an all time low.
The supply of silver is inelastic. Silver production will not ramp up significantly if the price of silver goes up. Supply did not increase in the 1970's when silver rose to $50 per oz. Some 80% of mined silver is a by product of base metals. Higher prices for silver will not cause base metal miners to increase their production. In the event of a global deflationary slowdown, demand for base metals would likely fall, thus decreasing the supply of silver.
There are only a handful of pure silver mines remaining. We cannot expect significant mine supply to depress the price after silver rises in price. It is extremely rare to find a good investment or commodity that is price inelastic in both supply and demand. This is another powerfully bullish aspect unique to silver.
Continued another day.
Moral of the story buy SLV for the long term. Every month add to your IRA or 401 or your stock account an accumulation like $200 or $500 every month untill the metal hits $20 per oz. Then hang on for doubling and tripling of your investment.