Silver is one of the eight precious metals and an important industrial metal. Silver possesses excellent physical and chemical properties, including superior flexibility, ductility, conductivity, and thermal conductivity, high reflectivity, and corrosion resistance. Therefore, it is widely used in currency, jewelry, electronics, photography, and other fields.

Global silver mines are mainly by-products, primarily distributed along the Pacific Rim. Only about 1/3 of the world's silver resources are independent silver deposits; the other 2/3 are by-products of copper, lead, zinc, gold, and other non-ferrous and precious metal deposits. Global silver mines are mainly distributed in the circum-Pacific metallogenic belt, with Peru, Mexico, Poland, Australia, and China being major silver reserves.

Silver supply mainly comes from mining and recycled silver. Mined silver accounts for 70% of the global silver supply, while recycled silver accounts for 20%.

Mined silver has a relatively low concentration, with production steadily increasing. Mexico, the largest producer, accounts for only 20.1% of global production; however, the top 20 silver-producing countries account for 96.8% of global production. The largest silver mining company accounts for 5.32% of production, while the top 20 companies account for 48.4%. From the 1990s to 2010, global silver production steadily increased. Major silver-producing countries such as Peru, Mexico, and China have seen steady growth in production in recent years. However, global silver production fell slightly by 3.2% in 2011, mainly due to strikes at some major mines.

The surge in silver prices has spurred steady growth in recycled silver production. Global recycled silver production has reached 20% of total supply. Recycled silver mainly comes from photographic materials, electronic products, catalysts, and recycled silver jewelry. The amount of film in photographic materials has decreased, but growth in other areas has largely offset this decline.

Industrial demand for silver is expected to remain strong. The main areas of industrial demand for silver are the electronics industry, silver brazing alloys, the photovoltaic industry, and ethylene oxide catalysts, with the electronics and photovoltaic industries being the biggest drivers of future silver demand.

Investment demand for silver depends on economic conditions. We believe that the long-term trend of monetary easing will continue to push up silver prices, but in the short term, global economic instability, especially the recurring European debt problem, will suppress silver prices, negatively impacting investment demand.

Gold and silver prices move in tandem, but silver prices are more volatile. A careful study of gold and silver prices since 2000 reveals two phenomena: 1. Silver and gold prices generally move in the same direction, so gold prices can be used to predict silver price trends. 2. Silver is more volatile than gold. Data since 2003 shows that when gold and silver prices rise, the gold/silver price ratio falls, indicating that silver prices rise more than gold prices; when gold and silver prices fall, the gold/silver price ratio rises, indicating that silver prices fall more than gold prices. Therefore, silver price fluctuations are greater than those of gold.

From Guotai Junan Securities Research

 

1. Excellent physical and chemical properties make silver an important industrial and precious metal

Silver is one of the eight precious metals. Its abundance in the Earth's crust is only 0.075 ppm, ranking 65th among all elements, lower than mercury and selenium. It is silver-white in color. Silver rarely exists in its elemental state, mostly as sulfides associated with other non-ferrous metal ores.

Silver is an excellent industrial and jewelry metal with the following properties:

Good flexibility and ductility. Its ductility is second only to gold; it can be rolled into thin sheets and drawn into fine wires. One gram of silver can be drawn into a 1800-meter-long wire and rolled into a silver foil with a thickness of 1/100,000 mm.

The best electrical and thermal conductivity among metals. Silver has an electrical conductivity of 0.63*106/cm and a thermal conductivity of 4.29*W/cmK, the highest among metals.

High reflectivity. Silver's reflectivity is 91%, while platinum is 67% and palladium is 57%. Its high reflectivity makes silver bright and lustrous, widely used in jewelry and ornaments.

Chemically inert and easy to store. It does not react with oxygen but has a strong affinity for sulfur. When exposed to air for a long time, it combines with hydrogen sulfide (H2S) in the air, turning black on the surface to form black silver sulfide (Ag2S); it can also be directly combined with sulfur to form Ag2S when heated. At room temperature, halogens can slowly combine with silver to form silver halides. Silver does not react with dilute sulfuric acid, dilute hydrochloric acid, and alkalis, but it can react with stronger oxidizing acids (concentrated sulfuric acid, concentrated hydrochloric acid, etc.). Silver has good alkali resistance and does not react with alkali metal hydroxides and alkali metal carbonates.

 

2. A Brief History of Silver

2.1. Changes in the History of Silver Production

2.1.1. Silver in the Old World—Backward Technology, Low Output (3000 BC—1500 AD)

Concentrated silver mining began around 3000 BC. The first mature silver ore processing was in 2500 BC, when astrologers used the "cupellation" method to extract silver from lead-silver ore. At that time, the demand for silverware mainly came from the prosperous Minoan civilization and the later Mycenaean civilization, leading to the gradual development of silver mine location and mining in what is now Armenia.

Spain was a very important source of silver for nearly a thousand years. Spanish silver mines not only met most of the internal needs of the Roman Empire but also provided important silver resources for the Asian spice trade. To meet the emerging trade needs, Greece, Asia Minor, and Italy were also important silver-producing areas besides Spain.

2.1.2. Silver in the New World—Technological Changes and the Discovery of the New World Led to a Significant Increase in Output (1500-1875)

Huge technological changes (amalgamation method) and the discovery of the "New World" in South America in 1492 led to an order-of-magnitude increase in silver production.

Between 1500 and 1800, Bolivia, Peru, and Mexico accounted for over 85% of the world's silver production and trade. The remaining share mainly came from European countries such as Germany, Hungary, and Russia, as well as Chile and Japan.

2.1.3. The Rise of North America (1876-1920)

Global silver production technology innovation and new deposit development experienced explosive growth between 1876 and 1920. In the last 25 years of the 19th century, the annual silver production was four times the average production of the previous 75 years, reaching nearly 120 million ounces.

The discovery of new mines within the United States significantly contributed to the increase in global production, especially the Comstock Lode in Nevada, Leadville in Colorado, and several areas in Utah. Similarly, Australia, Central America, and Europe also played a significant role in the increase in global production. In the subsequent period from 1900 to 1920, new mines continued to be discovered in Canada, the United States, Africa, Mexico, Chile, Japan, and other countries, resulting in a 50% increase in production to 190 million ounces per year.

Technological advancements included steam drilling, mining, and dehydration, while improvements in hauling technology were also a major breakthrough. Further upgrades in mining technology enhanced ore processing capabilities, allowing for the simultaneous processing of a larger volume of silver-bearing ores. For example, a technique called fuming, used to extract precious metals from zinc, enabled the refining of economically valuable precious metals from medium-grade ores.

2.1.4. Contemporary (1921-Present)

Many advancements in the early part of the last century led to increased silver production worldwide. These advancements were particularly significant because by the end of the 18th century, many high-grade ores had been depleted worldwide. These advancements included:

Bulk mining methods, both surface and underground, capable of processing large quantities of low-grade base metal ores containing silver.

Refining techniques capable of separating different types of base metal concentrates from ores.

Improved ore separation techniques, especially flotation (after 1910), capable of separating silver from lead, zinc, and copper concentrates.

Improved electrolytic refining techniques capable of separating silver and other base metals from refined clays, gradually becoming an important source of silver refining.

The explosive growth in the production of various base metals throughout the 20th century led to an increase in the production of silver-bearing residues, ultimately increasing the amount of silver refined.

2.2. The Century's Silver Price Can Be Broadly Divided into Three Historical Stages

Over the past century, silver prices have fluctuated significantly under various stimuli. The United States, as a former major silver producer and holder of significant silver reserves, has been a major force in influencing silver price trends for a considerable period. The trend of silver prices after the 20th century can be mainly divided into three stages.

Stage One (1900-1932): Low Silver Price Fluctuations. This stage witnessed two significant events, World War I and the Great Depression, which significantly impacted silver prices.

Before and during World War I, silver prices fluctuated between $16,400/ton and $20,000/ton.

After World War I (1918), silver prices surged rapidly, reaching $36,000/ton by 1919.

Subsequently, silver prices continued to decline, reaching $9,000/ton by 1932. The main reasons included: decreased demand for silver from major silver standard countries, China and India; faster growth in silver production, resulting in sluggish supply and demand; and the Great Depression of 1929 further exacerbated the decline in silver prices.

Stage Two (1932-1968): The United States Drives Up Silver Prices. The Silver Purchase Act of 1934 required the US government to purchase large quantities of silver until silver accounted for one-quarter of the US national monetary reserves ("three parts gold, one part silver"), or until the market price of silver reached $1.29 per ounce. (At this time, the US was under the Bretton Woods system, with the dollar directly pegged to gold). The introduction of the Silver Purchase Act had two main considerations: the US government, on the one hand, considered the interests of the silver interest groups and the seven silver-producing states behind them (Utah, Idaho, Arizona, Montana, Nevada, Colorado, and New Mexico). Due to the sharp drop in international silver prices, the income of the silver mining industry plummeted. These seven states held 1/3 of the seats in Congress, and their combined power was undeniable. On the other hand, it hoped to introduce a bimetallic standard under the constraints of the gold standard, release currency, create appropriate inflation, reduce debt burdens, and stimulate the economy. Directly stimulated by the Silver Purchase Act, silver prices entered a "slow bull" market, rising to $68,800/ton by 1968.

Stage Three (1968-Present): The Financial Attributes of Silver Are Activated. In the 1960s, the United States sold 1.7 billion ounces of silver to combat inflation, significantly reducing its silver reserves. After the dollar decoupled from silver in 1968, silver prices became more reflective of its financial attributes and, after an episode of extreme speculative trading, its elasticity was fully activated, significantly increasing volatility.

From 1968 to 1971, affected by the US economic recession, silver prices fell to $2 per ounce. US oil giants, the Hunt brothers, and Arab tycoons seized the opportunity to manipulate silver prices together, pushing the price up to an exorbitant $50.35 per ounce. After being countered by downstream consumers, it plummeted again to $10 per ounce.

The Hunt brothers' frenzied speculation on silver prices ultimately failed, but it completely activated the elasticity of silver prices, and the financial attributes in its price gradually emerged. Although industrial demand for silver still dominates, since then, silver prices have become more closely linked to economic and political factors. Entering the 21st century, with the moderate recovery of gold prices, silver prices have once again entered an upward channel. After the 2008 financial crisis, silver prices did not plummet as they did during the Great Depression, but instead rose steadily, once again approaching the historical high of $50 per ounce.

 

 

3. Global Silver Mines Are Primarily By-products, Mainly Distributed Along the Pacific Rim

3.1. Two-thirds of Silver Resources Are By-product Ores, with Fewer Independent Silver Mines

Of the world's silver resources, only about one-third are independent silver deposits with silver as the main component. The other two-thirds of silver resources are by-products of copper, lead, zinc, gold, and other non-ferrous and precious metal deposits.

In base metal sulfide ores (copper, lead, zinc), silver is most commonly found in galena (PbS), followed by chalcopyrite (CuFeS2), with the least amount in sphalerite (ZnS). Currently, 25% of the world's mined silver comes from silver mines, 15% from gold mines, 24% from copper mines, and 35% from lead, zinc, and lead-zinc mines. The remaining 1% comes from other ores.

 

Because silver-bearing ores can form during different stages of geological processes, these silver minerals are often distributed in different mineral assemblages. There are many types of silver-bearing minerals, with six main types (Table 3). In addition, the main types of silver deposits include: deposits related to continental and marine volcanism (continental volcanic rock type, marine volcanic-sedimentary type); deposits related to magmatic intrusions (porphyry type, hydrothermal alteration type in nitrate rocks and skarns, "five-element" — Ag, Co, Ni, Bi, As deposits in Precambrian metamorphic rocks); deposits related to sedimentation (hydrothermal sedimentary type in sedimentary rocks, vein-type, disseminated type, and stratiform deposits in metamorphic rocks, clastic sedimentary rocks, and shales).

Form deposits.

3.2. Silver deposits are widely distributed globally, but mainly in the Circum-Pacific metallogenic belt.

Globally, significant silver resources are concentrated in the Circum-Pacific tectonic-metallogenic belt, the Paleo-Asian tectonic-metallogenic belt, the Australia-Himalayan tectonic-metallogenic belt, and relatively older metallogenic areas in the North American, Central European, South African, Indian, and Australian blocks, with the Circum-Pacific metallogenic belt being the most important.

According to USGS data from 2010 (USGS reserve data does not include Russia), the main silver resource countries are also located in the Circum-Pacific region, with a total global reserve of 530,000 tons. The largest silver resource country is Peru, with reserves of 120,000 tons, followed by Poland in Eastern Europe with 85,000 tons, Chile with 70,000 tons, and Australia with 69,000 tons. China ranks fifth with 43,000 tons, while Mexico, the world's largest silver producer, has reserves of 37,000 tons, ranking sixth, followed by the United States, which was once the world's largest silver producer. These seven countries account for more than 5% of global silver reserves, with a combined total of 86%.

 

 

China's silver reserves are not particularly large. By region, the central-southern region has the most silver reserves, accounting for 29.5% of the total reserves. This is followed by the eastern region (26.7%), southwestern region (15.6%), northern region (13.3%), northwestern region (10.2%), and northeastern region (4.7%). By province, Jiangxi has the largest reserves at 18,016 tons (15.5% of the national total), followed by Yunnan (13,190 tons, 11.3%), Guangdong (10,978 tons, 9.4%), Inner Mongolia (8,864 tons, 7.6%), Guangxi (7,708 tons, 6.6%), Hubei (6,867 tons, 5.9%), and Gansu (5,126 tons, 4.4%). These seven provinces (regions) account for 60.7% of the national total reserves.

 

 

4. Silver supply is mainly from mining and recycled silver.

The supply of silver is mainly from mining and recycled silver. The latest data shows that mined silver accounts for 70% of the global silver supply, while recycled silver accounts for 20%.

4.1. Low concentration of silver mining, steady growth.

4.1.1. Low concentration of silver mines.

The global concentration of silver mining is relatively low. Mexico, the largest producer, accounts for only 20.1% of global production, but the top 20 silver-producing countries account for 96.8% of global production. The largest silver mining company accounts for 5.32% of production, and the top 20 companies account for 48.4% (Table 5).

In addition, since silver is mostly a by-product, its production does not always depend entirely on its own supply and demand.

4.1.2. Steady growth in global silver production, but a slight decline in 2011.

Historically, from the 1990s to 2010, world silver production has shown steady growth. Major silver-producing countries such as Peru, Mexico, and China have seen steady growth in production in recent years (Figure 7).

However, global silver production fell slightly by 3.2% in 2011, mainly due to declines in production in Peru, Australia, and the United States. The decline in Peruvian silver production was mainly due to strikes at many mines and reduced production at Volcan Compania Minera, which is consistent with the overall decline in the country's mining production. In that year, Mexico surpassed Peru to become the world's largest silver producer.

Figure 8: Growth of silver mine production in 2011 relative to 2010.

4.1.3. Huge future production capacity from silver mines under construction.

First, let's briefly introduce the top five silver mines in the world:

1. Cannington Lead-Zinc-Silver Mine, Australia

This mine belongs to BHP, located in Mount Isa, a mining town in northwestern Queensland. The ore body is located in the Mount Isa copper-lead-zinc-silver belt of the Mount Isa tectonic rock belt. It is a blind ore deposit, buried at a depth of 10-60m. The mine has reserves of 7.18 million tons of lead + zinc and 23,000 tons of silver. Mining began in March 1997, with an average lead grade of 10.57%, zinc grade of 3.88%, and silver grade of 476 g/t. In 2004, silver production was approximately 1,300 tons, with an average grade of 570 g/t. This mine is also the world's largest and lowest-cost lead-zinc producer. The Mount Isa copper-lead-zinc-silver belt where the mine is located is the world's largest zinc metallogenic belt.

2. Fresnillo Silver Mine, Mexico

The Fresnillo silver mine belongs to Fresnillo, the world's largest silver producer. Fresnillo owns seven producing silver mines, with the Fresnillo mine being the largest and oldest. The mine has been in production since 1554 without interruption, with silver reserves of 9,206 tons and an average grade of 287 g/t. It is an underground mine with an ore processing capacity of 8,000 tons/day. In 2011, the mine produced 858.86 tons of silver, with a current mine life of 13.3 years.

3. San Cristobal Silver-Lead-Zinc Mine, Bolivia

The San Cristobal mine is located at an altitude of 13,000 feet on the Bolivian plateau, 500 kilometers from La Paz, a city in western Bolivia. San Cristobal is one of the world's largest zinc, lead, and silver deposits. It is a low-grade mine, open-pit mined, and operated by a subsidiary of Sumitomo Corporation of Japan. The mine has silver reserves of 15,000 tons, with an average grade of 53 g/t, a zinc grade of 1.41%, and a lead grade of 0.48%. The mine processes 40,000 tons of ore per day and produces 760 tons of silver per year.

IV. Antamina Polymetallic Mine, Peru

The mine is located in the San Marcos region, Ancash region, 200 kilometers from Huaraz, a city with an average elevation above sea level of over 4300 meters. The company owns its own port. The mine is a super-large polymetallic mine, mainly copper, with associated silver. Silver reserves are 8700 tons, with an average grade of 11.7 g/t. It is open-pit mined, processes 430,000 tons of ore per day, and produces approximately 1800 tons of silver per year.

V. Rudna Copper Mine, Poland

The Rudna copper mine is located in Polkowice, western Poland, 350 kilometers southwest of Warsaw, the capital. It is Poland's largest copper and silver mine. Silver reserves are approximately 21,500 tons, with a silver grade of 42 g/t and a copper grade of 1.78%. Annual ore processing capacity is 13 million tons, with a silver output of 546 tons and a copper output of 231,000 tons. Between 2005 and 2007, the prices of copper, lead, zinc, and gold rose sharply, leading to a large increase in mining capacity in 2009-2010, and also increasing the production of silver as a by-product. As long as the future prices of base metals are higher than their production costs, the supply of silver should steadily increase with the growth of copper, lead, and zinc production.

 

 

At the same time, driven by factors such as increased silver demand and rising silver prices, major silver mining companies have increased the construction of silver mining projects, and silver mine output will gradually increase in the next few years. Overall, silver mine output will steadily increase.

 

 

4.2. Steady growth in recycled silver in recent years, the second most important source of supply

According to World Silver Survey data, with the rise in silver prices, the output of recycled silver has steadily increased in recent years. Recycled silver production has reached 20% of global silver supply, becoming an effective source of silver supply in addition to mine silver.

Although the decrease in the use of photographic materials has led to a corresponding decrease in the production of recycled silver from photographic materials, the increase in silver recovery from other industries such as electronics and catalysts has offset the decrease in the photographic materials sector.

The main sources of global recycled silver are the United States, Japan, India, Germany, the United Kingdom, and Russia. The higher recycled silver production in these countries is largely related to the sources of recycled silver. Currently, recycled silver mainly comes from photographic materials, electronic products, catalysts, and silver jewelry recycling. The United States and Japan have the world's largest film producers, while India is a major silver jewelry producer.

 

4.2.1. Silver recovery from photographic materials

The silver content in photographic materials, also known as the silver coating weight, varies from less than 1 gram to 8 grams per square meter. Generally, the silver coating weight of slow, fine-grained emulsions is lower than that of high-speed, coarse-grained emulsions. Films always have higher-speed, coarser-grained emulsions than photographic papers, so the coating weight of films is also higher than that of photographic papers. In addition, color films and photographic papers can achieve 100% silver recovery because the silver can be completely dissolved in the fixing solution, while black and white films, photographic papers, and negatives cannot achieve 100% silver recovery.

 

4.2.2. Silver recovery from electronic products

The scope of electronic product recycling includes computers, communications, military, and consumer electronic devices. Electronic waste varies greatly in physical properties, metal content, and metal quality. Therefore, the infrastructure for recycling electronic waste is not as complete as that for photographic materials. Most electronic waste is not recycled. We believe that with technological advancements, the amount of recycling will increase.

4.2.3. Silver recovery from jewelry—relatively mature

Silver recovery from jewelry is a significant source of recycled silver, but relevant data is lacking. Because the recycling rate of silver jewelry and silverware has always been high in Asian countries such as India, and a lot of waste silver scraps are also produced in the production of silver jewelry and silverware, recycling is relatively easy, and the technology is more mature than that of electronic waste recycling. It is the main source of recycled silver in some less industrialized developing countries.

4.3. Government silver sales have decreased year by year

Since 2000, with the increasing risks in the global monetary system and the continuous increase in the value of silver, the amount of silver sold by governments has decreased year by year.

Figure 10: Global government silver sales are decreasing

5. Silver demand—listing amplifies domestic investment demand

Silver demand can be broadly divided into physical demand and investment demand.

Physical demand includes the use of silver in various fields such as industry, photographic materials, jewelry, silverware, and silver coins, accounting for more than 80% of total silver demand and is the main end-use consumption of silver.

Investment demand for silver has grown rapidly in recent years. This is largely related to the bull market that silver prices experienced after entering the 21st century. The high elasticity of silver prices provides speculative funds with a good target in one-sided price trends. The currently high investment demand indicates that there is a significant amount of financial attribute premium in the current silver price, rather than reflecting the physical supply and demand situation.

Figure 12: Silver's Three Application Revolutions

5.1. Physical demand for silver

For a long time, a large amount of high-purity silver has been used to make silver coins and ornaments. With the development of science and technology, silver has gradually shifted to the application and development of industrial technology. Currently, it is widely used in electronics, computers, communications, military, aerospace, film and television, photography, and new energy industries.

 

 

After excluding the demand for photographic materials, jewelry, silverware, and silver coins from physical demand, it is defined as pure industrial demand, which is also the main physical demand for silver. The main applications include the electronics industry, chemical catalysts, and photovoltaics. The application of silver in many emerging fields also belongs to pure industrial demand, such as electronic radio frequency identification, barcodes, wood preservatives, medical, and food hygiene.

Industrial demand is the largest part of silver demand and plays a crucial role in the rise and fall of the entire silver industry. Benefiting from technological advancements, this influence has been on the rise. Reviewing silver consumption from 1990 to 2010, we can see that silver demand is mainly driven by economic development and industrial progress, and the application of new technologies and the rise of developing countries are playing an increasingly important role in silver consumption.

 

5.1.1. Silver industrial demand is expected to remain strong

The main areas of industrial silver demand are the electronics and electrical appliances industry, silver brazing alloys, the photovoltaic industry, and ethylene oxide catalysts. Among these, the electronics and electrical appliances industry and the photovoltaic industry will be the biggest drivers of future silver demand.

Silver has the highest electrical conductivity and thermal conductivity among all metals, making it an excellent material for making contacts, so it is widely used in the electronics and electrical appliances industry. Over the past two decades, the industry's demand for silver has steadily increased, from 91 million ounces in 1990 to 242.9 million ounces in 2010, a 167% increase with a compound annual growth rate of 5%. Its proportion of total processed silver demand also rose from 33% to 50%.

 

It is predictable that industrial demand for silver will have enormous potential in the future and will become a key driver of overall silver demand growth. According to GFMS forecasts, industrial silver demand is expected to rise from 13,800 tons in 2010 to 18,900 tons in 2015. Among them, electronics and photovoltaics will maintain good growth rates, becoming the main drivers of increased industrial silver demand.

 

5.1.2. Photosensitive materials are expected to decline slightly but steadily.

In 2010, the application of silver in photosensitive materials further declined, with consumption reaching 2,261 tons, a year-on-year decrease of 8.3%, or 204 tons. Although this is the smallest single-year decline in photosensitive material consumption in nine years, with the penetration of digital technology, future consumption of silver in photosensitive materials will continue to decline year by year.

In the long term, the amount of silver used in the photography industry will inevitably shrink further. Although silver halide technology will still exist as the main demand in the photography industry, with the digitalization of consumer photography, the animation industry, and radiography, its market share will inevitably shrink. Currently, many large photography companies are abandoning traditional silver halide technology and turning to other fields, and the global silver demand share in the photography industry will further decline.

5.1.3. Steady demand for silver jewelry, with future growth mainly in China and India.

Globally, the demand for silver jewelry is double that of gold. Among all precious metals, silver's weight share in precious metal jewelry rose from 60.5% in 1999 to 65.6% in 2005. However, after 2000, with the continuous rise in silver prices, jewelry demand decreased.

The main consumers of silver jewelry globally are Western countries. In 2005, the consumption of silver jewelry in the United States reached 1,670 tons, ranking first globally and accounting for 31% of global consumption that year; India was second with 457 tons; and Germany was third with 375 tons. The top five countries accounted for 58% of global silver jewelry consumption.

However, the future growth points of silver jewelry demand mainly lie in countries with a lower proportion of silver jewelry, such as China and India. It is difficult for Western countries to see a further significant increase in silver jewelry consumption, but there should be no decline either. If silver prices fall to a certain extent, it is expected to stimulate a recovery in silver jewelry consumption in price-sensitive regions such as India.

 

5.1.4. Emerging industrial demand

The applications of silver in emerging industrial fields mainly include new catalysts, food hygiene, supercapacitors, superconductors, healthcare, wood preservatives, water purification, radio frequency identification, solid-state lighting, and high-performance batteries.

The more significant growth in emerging industrial demand for silver includes silver oxide batteries and silver conductive inks in the electronics industry. High-performance silver-zinc rechargeable batteries are gradually showing their market potential, with applications including laptops, mobile devices, and most importantly, automated industries. On the other hand, with the continuous development of radio frequency identification (RFID) tag technology, the use of silver conductive inks in thin-film switches and printed circuit boards will also increase.

In recent years, silver, relying on its antibacterial properties, has appeared in mainstream emerging products in medical and hygiene supplies. For example, medical bandages impregnated with silver sulfadiazine have a good nursing effect on burns with high sterility requirements and have begun to become popular. Other medical technology developments, including nanotechnology, also promote the application of silver in these cutting-edge fields. Silver-impregnated medical devices can effectively reduce infections, and silver-containing fuels and coatings can also reduce the growth of bacteria and other microorganisms, achieving certain hygiene requirements.

In home life, the antibacterial properties of silver are also gradually being applied, with vast demand potential. Currently, some clothing, washing machines, and dryers already use antibacterial silver-gallium nano-carbon particle technology; air filters, water purifiers, etc., also have applications of silver, such as antibacterial silver faucets.

With the market's maturity of silver technology in various fields, the growth potential of silver demand in emerging fields is enormous. It is estimated that by 2015, the demand for silver in emerging industrial fields will rapidly increase from the current level of less than 300 tons per year to nearly 1,200 tons.

Figure 19 Forecast of Emerging Industrial Demand for Silver

5.2. Investment Demand - To Be Strengthened After Listing

The price of silver is significantly lower than that of gold, with a low investment threshold. At the same time, the volatility of silver prices is greater than that of gold, making it a good target for investment and speculation. After listing, the liquidity of silver will increase, which is expected to boost investment demand for silver.

6. Gold and Silver Prices Move in Sync, but Silver is More Volatile

Observing the performance of silver and gold prices since 1970, we can see that, taking the January 1971 data as a benchmark, the cumulative increase in gold prices has exceeded 42 times, while the cumulative increase in silver prices has only been 17.77 times. The increase in silver prices is far less than that of gold prices. This can be understood as because silver consumption is currently still mainly driven by industrial demand, and the financial attribute premium in silver prices is far less than that of gold prices. In an environment of sustained inflation and a decline in the real purchasing power of the pricing currency (US dollar), the long-term increase is less than that of gold prices.

We carefully studied the gold and silver prices after 2000 and found two phenomena:

1. The price trends of silver and gold are basically consistent, so the trend of silver can be basically judged by studying gold.

2. Silver is more volatile than gold. From the data after 2003, when gold and silver prices rise, the gold/silver price ratio falls, indicating that the increase in silver prices is greater than that of gold prices; when gold and silver prices fall, the gold/silver price ratio rises, indicating that the decline in silver prices is greater than that of gold prices. Therefore, the volatility of silver prices is greater than that of gold.