Silver Shortage: Real Problem?

July 27th, 2010 by

For years, talk has been circulating precious metals forums, conventions and coin shops about a coming shortage of silver. Its proponents use this argument to further the notion that silver demand will outpace supply on a growing scale, and this will augment prices. While the roots of this idea are sound, it’s unlikely that it will actually happen.

It is possible that the silver supply will decrease in a very tangible way in the near future. Because silver enjoys such common usage in modern electronics, of which a growing number are being produced, it stands to reason that in the absence of a suitable replacement, demand for silver will increase accordingly. About as much silver as is used to create the average sterling ring is used in the production of a modern laptop computer. Similarly, silver is used in the manufacture of cell phones, audio hardware and printed circuits.

So what about the usage of silver in these products necessitates an eventual termination of supply? It happens that because silver is so inexpensive (there are a number of theories as to why, including global manipulation of silver prices by the world’s largest holders of silver-backed paper), it is simply not cost effective to extract silver from these devices once they’ve served their purpose. Laptops, cell phones, and other electronics are either discarded, or set on a shelf to rot. In no case is the silver used in these devices reconstituted.

While the numbers on global silver production are concrete, estimates as to the future of silver demand are unclear. They rely on relative wealth of nations, tastes and a myriad of other factors. What is certain is that barring a marked increase in silver production, a depletion of global supplies is not outside the realm of possibilities.