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Rising silver prices reduce demand

Do rising prices threaten silver investing?

Given silver’s enormous range of industrial uses, concerns have been voiced that rising silver prices could lead to reduced industrial demand as silver is replaced with other, cheaper metals.

This is a fair concern, but it is interesting to note that in many of silver’s uses it is largely irreplaceable. Silver’s properties that make it such a good conductor, reflector or antibacterial are almost impossible to replicate with cheaper metals. This is why silver is often bracketed with the rare earth metals.

Another aspect of silver’s use that makes demand inelastic to price rises is that silver is often used in tiny quantities within an application. If only a few grams of silver are used to line the shelves of a fridge, the cost of this silver content can rise hugely with little impact on the far larger unit cost of the fridge. Silver is also used in very small quantities in medical applications, water purification and technological applications.

These phenomena conspire to insulate silver’s industrial demand from potentially damaging silver price rises.