Perhaps one of the most overlooked dynamics within the silver market is the integral role that the argent metal plays in a variety of industries. Citing the projected rise in the use of silver in high-tech electronics, First Majestic Silver Corp. (AG) is calling for a staggering ninefold rise in the metal's price by 2019.
Nine-Bagger for Silver?
Key to understanding silver's industrial appeal is its emergence as a crucial component of many of our most popular electronic devices. Due to its unique physical and metallic properties, there is no effective replacement for silver in the gadgets and technologies that we rely on every day, particularly cell phones. It should also be noted that silver has wide-ranging applications in all other sorts of technologies thanks to its great efficiency as a conductor of heat and electricity.
While the proliferation of high-tech gadgets in the developed world is therefore a boon for the global silver market, the prospects look even better in the biggest emerging markets. According to research conducted by technology giant Cisco (CSCO), India and China alone are expected to account for over 1 billion new sales of smartphones and tablets over the next five years!
With this in mind, First Majestic, the Canada-based silver miner, is calling for the price of silver to rise by a factor of nine over that period, resulting in a spot price of $140 per ounce as soon as 2019. Although this prediction is undoubtedly an outlier in comparison to mainstream forecasts, it's grounded in firsthand experience: First Majestic recently received a massive order from a Japanese electronics maker to lock in a future supply of silver in anticipation of this surging technology demand.
In fact, First Majestic's CEO Keith Neumeyer said, "For an electronics manufacturer to come directly to us—that tells me something is changing in the market." The company is well-positioned to make such a claim despite the startling triple-digit number being forecast: First Majestic Silver has been Canada's best-performing company this year, seeing its share price triple so far this year as silver prices have rallied 18%. Neumeyer also pointed out that behind gold (which is far more costly), silver is the best material for electric conductivity known to mankind.
According GFMS Thomson-Reuters, silver demand has outstripped supply each of the past 15 years, speaking to the limited availability of this versatile commodity. Aside from its relative scarcity and the lack of significant growth in the silver supply, the metal cannot readily be substituted in the technological applications cited by Neumeyer. There is no foreseeable alternative to silver in manufacturing cell phones and similar electronic devices. This doesn't even take into account the expected growth of photovoltaic cells for solar energy, which also use silver as an essential ingredient. Mineweb also notes that the anti-bacterial uses of silver continue to expand, as well.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.