-- Posted 30 June, 2011 | | Discuss This Article - Comments:

The state of global affairs has never been in such disarray.  Major governments are going bankrupt, inflation is running rampant in a majority of the countries that line the planet, and relationships between nations have never been so heated.

This past week, the Obama Administration took a direct shot at OPEC, leading the charge in a release of emergency oil reserves intended to keep prices low against falling supplies.  OPEC failed to increase oil production, and one holdout, Iran, turned the event into political drama.  Now some are wondering if the administration’s move may threaten the relationship between the United States and Saudi Arabia. 

Saudi Arabia has been the United States’ one ally in OPEC since a decades’ old policy of defense agreements for oil first matched the unlikely pair in the 1970s.

Amidst the riff-raff of international politics, one thing is certain: the uncertainty of oil prices is sure to boost silver demand, particularly from alternative energy sources.

Solar and Silver

Just last week, we notified our subscribers to a booming solar energy market, enabled by easy to access cash from the Federal Reserve and tax credits from the US Treasury.  Thanks to tax credits and rebates worth 30% of the purchase and installation price of solar panels, new financing deals have made direct solar investment a real possibility. At the same time, the fundamentals lining the current silver price have never been better.

It’s safe enough to say that solar energy will set a price floor for silver.

Thanks to a tax credit worth 30% of the solar panel purchase price from the US Treasury, and low-cost, long-term financing, more companies are getting into the solar lease business.  Google will fund a $300 million residential solar panel investment.  Bank of America raised a $2.6 billion fund to do the same for commercial buildings.

While the price of silver rises, solar energy and borrowing costs have plummeted.  Some states, such as California, have taken the market to a new level.   State incentives mean that systems that become economically efficient after 15 years in some areas are paid off in as little as 7 years.  Individuals looking to make the switch can do so with zero-money down from solar panel lease and installation companies that are taking the market by storm.

Fundamentals Remain Strong

Through 2015, the silver industry now has a very artificial, but beneficial, price floor at the current price of $35 per ounce.  The tax credits for solar expire on December 31, 2015, though there is little resistance to continuing the program under the guise of energy independence.

Should silver prices double in the same time, the net-effect on solar panel costs will drop through 2017, when solar panels are expected to cost just $1 per watt.  As silver is consumed in solar production, the price for silver will rise, even as solar panel investments make more sense in a low-interest rate environment.

We stand by the reality that inflationary pressures will drive future silver prices.  But now silver has a new outlet, propelled by monetary inflation and the necessary rise in energy prices that come with it. 

This is a no-brainer for silver investors.  Just like subsidies for ethanol sent the price of corn soaring, subsidies for solar investments will drive silver prices.  Silver is, after all, the only component in solar panel developments that is rising in price.  Get ready for the next move up.

Dr. Jeffrey Lewis

www.silver-coin-investor.com