Earlier today in my post on
Why silver jumped above 31, badon linked to an article in India's Daily News and Analysis about 6 reasons to buy silver, even though the price is at near-historic highs.
I'll save you the trouble of reading the whole thing, because from my view it's repetitive, but first it is time to learn the most important concept in all matters relating to money: supply and demand.
Supply and demand are the only two things in the economic world. The interaction between supply and demand determines prices. If supply goes up and demand stays the same, prices fall. If demand goes up and supply stays the same, prices rise. If supply and demand both move, prices can go up or down, depending on the relative rates. Economists spend years learning the nuances of how supply and demand interact based on different conditions, but that's all window dressing. Keep your eye on supply and demand. That is where the magic happens.
The article goes on about 6 different factors affecting supply and demand. I'll summarize them for you here:
Demand - more demand from China, more demand from industrial uses of silver, more demand from silver as investment
Supply - silver mines have only been producing so much the past few years, silver is difficult to recycle because it is used in such small quantities in (mostly) electronics, and there is no fast and easy way to increase mine production quickly or cheaply
So there you have it. Demand is increasing, and supply is staying pretty much the same. So that means higher prices as long as those two trends remain intact.
The caveat you have to keep in mind is that most of the increasing demand is from the so-called investor sector. I say so-called because a lot of it comes from Chinese and Indian people just trying to do anything they can to preserve their purchasing power. That's not so much investment as it is self-preservation. If the monetary authorities ever stopped the presses, this demand would lessen quickly. So to a certain extent, the silver demand is a self-fulfilling prophecy. But since the powers that be show absolutely no sign of letting up on the monetary expansion, it's full steam ahead for silver!
