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Investment demand for silver is soaring in China as the white metals is increasingly looked at as jewellery, industrial metal and an essential component in electronics and automotive industry.
07 Mar 2011
BEIJING (Commodity Online): Investment demand for silver is soaring in China as the white metals is increasingly looked at as jewellery, industrial metal and an essential component in electronics and automotive industry.

In 2010, China imported an unprecedented 14 percent of global silver as the demand for silver has been growing in the country. Till last year, China has been historically been a net exporter of silver.

In an interview to Silver Investing News, Chris Berry, founder of Mountain House Partners, said: “I know that the Chinese are buying huge blocks of the SLV silver ETF and then selling it to try and get their hands on the physical metal.”

‘You have the Chinese sitting on a store of $2.5 trillion US of which they know is completely useless, so I think they are looking at gold, but also at silver as a store of value and a way to hedge against the decline of the US dollar,’ he said.

While the SPDR Gold Trust exchange-traded fund (GLD) has increased 23.7 percent in the past twelve months, the corresponding silver exchange-traded fund (SLV) has skyrocketed 113.3 percent in the same time period.

In addition to its use as a hedge against inflation, silver is a key component in photovoltaic panels, which means industrial demand for silver is set to increase further as power companies up their utilization of solar energy.

“There is industrial demand for silver. You’ve got really two things going: there is infrastructure growth in Asia, but also silver is used in a lot of consumer goods,” said Berry. He explained that as China’s middle class grows, so does its demand for luxury “quality of life” goods, many of which contain silver. And it’s not only jewelry; silver is also a key component in electronics and the automotive industry.

Berry says that although he does see demand for silver in manufacturing, even in emerging markets like China it is its role as a hedge against inflation that is causing the greatest global demand for the mineral. “I think that has less to do with industrial demand and more to do with its role as a store value.”

According to Jim Steel, senior vice president and metals analyst with HSBC, the rising yield curve is supportive for a metal like silver. Silver benefits from its dual purpose as a currency and an industrial metal, he said.

He says an informal poll HSBC took among buyers of the silver ETFs suggested these buyers are mostly individuals who are holding onto theirs for inheritance reasons and that may be one reason why there’s been less movement out of the silver ETFs. “It could be that silver is off the market for years,” he said.

According to a recent research report from China Research Intelligence (CRI), an important feature of China's silver market is that the domestic price is higher than international market price.

“Domestic price of silver in China is not completely synchronized with the international price and it lags behind with too large fluctuation, resulting in increasing risk of downstream silver consuming enterprises,” says the report.

The CRI report said that China urgently needs to improve the formation mechanism of domestic silver price and seek appropriate trade modes to maintain values and avoid risks. It will be the general trend to introduce silver futures.

China and India are the largest silver marketplaces globally. While unprecedented constructions and setting up of new factories are driving up the industrial demand for silver, rising gold prices is forcing people to opt for silver jewellery in place of gold jewellery.
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COMMENTS (5)
Louisbuyter
17 Jun 2011
you welcome to this company
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Den
30 Mar 2011
A big mistake by Venger! Silver is very essential because it is the best conductor of electricity. Without silver all society would go back to the stone age. (think about radarsystems, all kind of electronics like dishwashers/computers etc... etc... they all contain one important component... SILVER!! Silver is an industrial Good so it is a very good investment. The Chinese are very smart to do so and by a lot of silver. PAPER DOLLARS AND PAPER DOLLARS ARE NOT ESSENTIAL THEY ARE ONLY PIECES OF PAPER!!! Silver is real money, you can use this metal to make something. If people don't trust their currency anymore, a paper dollar or a paper euro is just....A PIECE OF WORTHLESS PAPER. Silver (and gold) are real money!!
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Steve
08 Mar 2011
his article dances all around and back and forth about that which could and should have been said in just a few sentences: THE CHINESE ARE BUYING SILVER IN MASSIVE QUANTITIES FOR JUST ONE REASON. TO HEDGE THE OUT OF CONTROL INFLATION IN THEIR COUNTRY, EVEN AFTER THREE INTEREST RATE HIKES. THE CHINESE HAVE NOT LEARNED THE LESSON THAT THEY MUST INCREASE THEIR CENTRAL BANK INTEREST RATE ABOVE THE REAL RATE OF INFLATION TO CURB THE INFLATION PROBLEM. THAT IS WHAT THIS ARTICLE SHOULD HAVE BUT DID NOT SAY.
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HistoricalSilver
08 Mar 2011
Good. An emotional outburst like that comment is usually a good sign that the truth has been spoken, and the truth can sometimes be hard and painful to accept. Silver is the most essential of all metal elements in the world, and it has been a currency for longer periods in human history than even gold.
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Venger
07 Mar 2011
Most stupid article i have ever read on silver. Lagging infos + trend follower on a all times high...better unload your position, SILVER IS NOT ESSENTIAL AND IS NOT A CURRENCY!
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