By SD Contributor AGXIIK:
The price of silver is inelastic. The price of silver has little bearing on its utility. At $33 an ounce, it is still very cheap as an industrial commodity. As vital as silver is to the solar, electronic, medical and clothing industries, the amount of silver used in any product is nearly infinitesimally small. A smart phone uses no more than .2 grams of silver. That amounts to pennies of silver per item. A solar panel uses 20 grams, about $20 per panel and those panels will absorb 6% of the entire world’s supply, 60 MOZ There is no replacement to silver in that use and the solar use of silver in China, Japan and India is set in stone. They are crying for energy that is not hydrocarbon based.
If the world’s supply/production of silver is 1 billion ounces that’s $33 billion. We spend more on dog food and manicures than this world supply of silver. If silver tripled to $100 an ounce, would we blink a second that silver prices bumped the cost of a smart phone by 20 cents? I don’t think so!
If silver went to $250 an ounce we are now talking about $250 billion in silver production/supply. Will we bat an eye if the silver in our smart phone now goes to $2. Not likely. We may salvage silver from trash and recyclables but we will use silver at the traditional rate or even a higher rate, thus making an even more serious dent in silver supply.
The one thing that in vital to keep in mind is that we can’t print silver. It is impossible to ramp up silver production quickly since 70% of the white metal production is a by product of base metals. Base metal mining is dropping due to the world wide economic slowdown and that condition will last for years. There is nothing on the horizon that should a clear indication that the world wide GDP will ramp upwards any time soon.
As SRSrocco has wisely pointed out so many times that even I get it, silver ore grades are dropping like a stone, the EROI is rising exponentially and the demand for silver continues unabated.
China and India alone will take 25% of world supply this year, next year and to the foreseeable future. When countries that represent 40% of the world’s population and 20% of its GDP want something, they will have it at any price. Not having it is completely unacceptable. Survival issues loom large in the front window for these countries since nothing replaces silver and likely at any price.
It may take a year or two for the real demand/supply crunch hits, but it will hit. War will exacerbate this demand and world wide wars are in our future, whether they embroil us or not. War begets every sort of bad economic condition and if some of you remember the metal drives of WWII, silver metal war drives will replace steel and aluminum as the modern equivalent of commodities in short supply.