A quiet battle is being fought in the silver market between investment interests and industrial demand.
The world is finally waking up to the fact that governments can take the real silver money out of circulation, but they cannot take the money out of silver as a commodity.
Silver as Money
Silver still has monetary demand among investors concerned about the long term viability of paper currencies and their inherent inflationary tendencies. Silver is also easier to set aside for hard times than stock piling food, fuel, and other items for barter.
Despite its historical monetary usage, silver is currently not as easy to use for everyday purchases in the United States as the US dollar. Nevertheless, silver is a highly liquid commodity that can readily be exchanged for US dollars, which can then be used to purchase goods or services.
Price Drives Sentiment
Since the US dollar price of silver is measured in terms of a paper debt instrument that is being created at an unprecedented rate without any hard assets backing it up, silver’s price should be trending higher in dollar terms.
The upward trend in silver is also established since investment grade physical silver is getting harder and harder to come by for individuals interested in protecting their wealth against the risks inherent in holding paper currencies.
The vast majority of investors will likely miss the great silver rally, especially given what comes to mind for most people is an association with the Hunt brothers, coin collecting and even Mad Max scenarios.
Bullish Silver Sentiment Could Prompt an Industrial Shortage
Unfortunately for silver bulls, the price discovery mechanism for silver is still driven by the few bullion banks who dominate the short side of the paper futures market. Despite that, a broad based investor-led silver rally could well occur once the price floor for silver becomes well established above the $50 level.
Furthermore, given the ongoing competition between silver investors who tend to be sentiment driven and industrial demand that tends toward the slow and steady accumulation of physical silver, once an industrial shortage of physical silver develops, it could already be too late to invest in silver.
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