Wednesday, 8 May 2013

It Only Takes One Major Buyer to Ignite the Explosion in Silver Prices

Silver value today is not consistent with its underlying fundamentals of supply and demand. The high demand and strictly limited remaining supply of silver both above-ground and below-ground are going to ignite a silver prices explosion in the near future. This article explains one of the six primary reasons silver prices are about to undergo a tremendous increase.
What do you do... if you are manufacturer and you suddenly can't get the materials you need to make your products ... or the price of these materials start to rise quickly?
You look for a quick substitute and/or raise your prices... But what if there is no viable substitute and competition will not let you raise prices and keep your customers?
You panic, and you try to build your inventory of the materials you need.
What happens when you start to pre-purchase and build inventories of a material that is in strictly limited supply and is already rising in price?
The price goes up even faster!
This is the current state of silver.
Silver is one of the most useful of all precious metals with literally thousands of applications besides jewelry, ornamental items (like silverware, platters, figurines, etc.), and silver coins. And unfortunately, when silver is used for these industrial applications, it is normally used up and is gone forever.
Most companies using silver in their industry keep lean inventories using the JIT (Just In Time) manufacturing methods. In other words, they order the materials needed so they arrive "just in time" to use it in their manufacturing process; this delays the cost of the materials and minimizes inventory storage and tracking costs.
Furthermore, world production of silver is only meeting about half of the world consumption of silver with Government inventories making up the difference. But now, Government inventories around the world are completely or almost completely depleted. Also, since the U.S. Geological Survey has discovered there is very little silver left in the ground (they state it is the most rare of all precious metals still below-ground), the supply of silver bullion is "strictly limited".
So, what happens to these companies using JIT manufacturing when (1) we are only producing half the silver bullion currently in demand, (2) we have essentially zero inventories, and (3) there is a strictly limited supply of silver left in the ground... and the inevitable delays in silver delivery begin?
These companies are going to jettison the JIT process... at least for silver bullion... and try to pre-purchase and build their inventories. And as we already discussed above, when this happens, the price of silver bullion will start to rise.
The real issue here is it only takes one significant manufacturer using silver to kick off this trend, and we have seen it happen before with Palladium. The Palladium scenario was based on fear of shutting down assembly lines due to late deliveries; real supply was not the problem.
Silver bullion, however, is completely different; there is a major supply problem brewing. If just one major manufacturer begins to hoard silver bullion, it will tighten the supply (and raise the price) for all the other manufacturers.
What types of manufacturers are we talking about here?
Just about any manufacturer that makes batteries, steel bearings, silver brazing, plastics or adhesives, polyester textiles, magnetic tapes, metallurgy, electrical conductors, electronics, pharmaceuticals, eyeglasses, solar cells, and lots more. And it only takes one... anywhere in the world!
An explosion in silver prices is coming; it's inevitable, and this is just one reason behind the explosion. Buy silver now before it's too late.
Written by Dr. Bryan Stoker
Click here to read the other 5 reasons silver prices are going to soar and to read more silver articles.
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