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Why Buy Silver? Update #19

-- Posted 18 January, 2008 | | Discuss This Article - Comments: Source:

Your independent Swiss asset manager                         






Silver/Ounces in US$

Buy Date


Buy Price

Total (USD)

Price Today

Value Today

November 15, 2002


















Profit (in %)



















1980 to 2008:  From bear to bull: This bull has a long way to go!



The price of silver is rising. If you have not noticed it yet, above chart tells the story. The up-trend is solidly established with some spectacular leaps within a few weeks of 40% or more. After an eighteen months consolidation, another bout of the same magnitude would not surprise us.


The long-term picture of the silver price


Important price spikes are often preceded by lengthy consolidations which often last months. Many an investor feels tempted to sell while in fact they should be buying. But often, it so much easier to go with the crowd than using detached judgement.


During 2006 and 2007, the silver price twice approached the level of $ 15. Each time, it was followed by a marked sell off. Notice, the one of last year got down to $ 11.40, a typical example when investors panic.


On the other hand, you have to compare the consolidation phases of 2002/4 and 2004/5 before the silver price jumped to new recovery highs with the consolidation phase that started in May 2007. History does not have to repeat itself. Yet it is easy to see that a next important move is in the making.



The medium-term picture of the silver price


Critics of technical analysis include well known fundamental analysts. For example, Peter Lynch once commented, "Charts are great for predicting the past." Warren Buffett has said, "I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer" and "If past history was all there was to the game, the richest people would be



What we see below is a breakout - when a price passes through and stays above an area of support or resistance. The least one can deduce is that buyers gain the upper hand over the sellers. To us, this is important. The longer it takes to overwhelm the persistent sellers, the bigger the price move may be. History, in this case, sets examples.



Fundamental Considerations: THE RISING SILVER DEMAND


Silver is unique. Its natural beauty is legendary. Its range of applications is exceptionally broad. As a precious metal, it has been a source of human adornment since the beginning of time. As a principal component of fine tableware, appropriately called silverware, it has served as an important utensil for fine dining for centuries. As a light-sensitive element, it has revolutionized preservation of memories in the form of photographic images. More recently, its unique properties comprising of anti-bacterial qualities, corrosion resistance, malleability, ductility, reflectivity and conductivity have opened new possibilities for a myriad of other industrial applications.


Supply versus Demand


Over the past ten years, supply of silver (mine production and silver scrap) has increased by 26% while demand (total fabrication) expanded only by close to 10%.


While estimated total silver bullion inventories have fallen dramatically over the past ten years, the decline will likely be a lot less spectacular as the flattening curve above also suggests.


Mine production will most likely increase more rapidly as the demand through industrial applications.


Silver possesses exceptional qualities:


Silver reflects! The film coating on mirror backings is silver. Mirrors are used in telescopes, microscopes, spacecraft and solar panels, as well as bathrooms! Don't forget the silver transparent coating on double-pane thermal windows.

Silver conducts heat! Those silver ceramic lines fired into your car's rear window keep the window clear of frost and ice.

Silver conducts electricity! Silver is the metal of choice for switch contacts because it does not corrode. Every time you start your microwave, dishwasher, television set, car engine, etc., silver contacts complete the electrical circuit. The same thing happens when you tap the keys of your computer keyboard, adjust your car's power seats, or release the power trunk lock. Silver is there.

Silver kills bacteria! Silver chemically affects the cell membranes of bacteria, causing them to break down. Bacteria do not develop resistance to silver, as they do to many antibiotics. Silver solutions are used in burn treatments. Silver gauze packs the wounds of patients during transport to medical facilities. Silver nitrate drops are used to clean the eyes of newborns. Hikers use portable silver-based water purification systems for drinking water.

Silver rings! Silver has a pure acoustic resonance and is preferred by musicians for making high quality silver bells and musical instruments.

captures images! Silver salts are the basic image capture and forming materials in photography. Every picture of your sweet little darling contains silver, as well as medical/dental x-rays and your favourite movie.

Silver is pretty! Don't forget the silver in your jewellery or traditional tableware. It's a favourite medium because it is soft and malleable, and can be shaped into any form. Silver has been used in cherished heirlooms and gifts for centuries.





Gold and Silver


The gold price divided by the silver price fluctuated between 30 and 100 for a middle price of 65 during the past twenty-five years. The ratio presently stands at 55. It has been rising throughout 2007 when gold performed better than silver.


It may well be that silver will outperform gold from now on and that this ration will continue to drop. Silver, during the bull market of the seventies, outperformed gold significantly.




The recommendations were valid at the time of writing, viz. at



and may no longer be valid at the time of reading.


Peter Zihlmann


+41 44 268 51 10

+41 79 379 51 57




Disclaimer:  P. ZIHLMANN INVESTMENT MANAGEMENT AG does not accept any liability for any loss or damage whatsoever, that may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in the trading recommendations or in any accompanying chart analyses, whether communicated by word, or message, typed or spoken by any of its employees.



-- Posted 18 January, 2008 | | Discuss This Article - Comments:


Last Three Articles by Peter Zihlmann, Zihlmann Investment Management AG

Silver: Buy, Hold Or Sell? Update #22
30 November, 2011

Silver: Buy, Hold Or Sell? Update #20
16 March, 2011

Why Buy Silver? Update #19
18 January, 2008

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