Like silver? Love silver!

15-Feb-2011 As we approach the end of February I very much suspect that the recent dip in the gold and silver price is about to come to an end.

There are many signs of a shortage on the physical side with both metals, so much so that I find it quite incredulous that we had a dip at all over the last two months. I know that many of you recognise the absurdity of this situation and have already taken advantage of the recent dip to add to your stock pile. If you haven't, my take on this is that the clock is ticking.

One company I spoke to yesterday in the UK regarding buying sovereigns say they are currently fulfilling orders placed last July - that's an eight month waiting list for physical gold.

Meanwhile "Backwardation" in silver is something of a surprising event in 2011 (This is when the market quotes a lower price for spot delivery or a more and a higher price for a distant delivery date on the futures market). This would indicate buyers are concerned about future supply and as a result are willing to pay a premium for spot delivery. Worldwide demand is increasing and in China alone we have seen a 400% increase in demand over the last 12 months. Amazingly silver has dipped of late - although this may be on the back of the 65% increase in price we saw in 2010. Happy days.

Meanwhile industrial demand for silver continues to rise as it is used in increasing quantities in lots of different applications.

Solar energy is just one example where demand has risen massively from an almost zero base. A recent report from Barclays estimates that this current demand equates to more than 800 tonnes of silver being used in solar energy cells in 2009, which equates 4% of total global silver supply.

Barclays suggests that silver usage in solar panels could more than double over the next 12 months to reach 2,000 tonnes by 2012. If they are right, this would consume around 7% of all global silver output - and remember, that is just one sector of the market. Silver continues to be used in an increasing number of applications and in far greater quantities than ever before.

What is there not to like about silver investment in 2011?

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