Red-Hot Resources: Is It Silver's Time to Shine?

Here's a chart and some analysis ...

PRODUCTION: Silver mine production rose by 0.6% in 2006 to 646.1 million ounces[1]. In 2005, silver mine production rose 3.4% (to 642 million ounces). Demand dropped fractionally in 2006 to 840.5 million ounces after growing by 3.8% in 2005.

History shows us that about a third of new mine projects suffer serious delays.

Top 20 Silver Producing Countries in 2006 (millions of ounces)
1.	Peru	111.6
2.	Mexico	96.4
3.	China	75.4
4.	Australia	55.6
5.	Chile	51.5
6.	Poland	40.4
7.	Russia	39.6
8.	United States	36.7
9.	Canada	31.2
10.	Kazakhstan	26.1
11.	Bolivia	15.2
12.	Sweden	8.6
13.	Indonesia	7.7
14.	Morocco	7.6
15.	Argentina	6.1
16.	Turkey	6.0
17.	Iran	3.2
18.	South Africa	2.8
19.	India	2.7
20.	Uzbekistan	2.3

Above-Ground Stockpiles

Are Getting Critically Low

In 1990[2], there were around 2.2 billion ounces of silver held in above-ground stocks. As recently as 1995, there were 1.4 billion ounces of bullion in stockpiles. Today, there are probably only about 300 million ounces. That's a 50-year low.

Industrial Demand

Is Surging

Unlike gold, silver is also an industrial metal. Industrial demand for silver is hot and getting hotter. Silver is the best metallic conductor of electricity, and uses for it are growing. In 2006, industrial applications of silver grew at a 65 rate to 430 million ounces, recording the fifth consecutive year of growth in this category.

For example, you know how Sony computer batteries caught fire (literally) last year. Well, newly developed silver-zinc batteries don’t catch fire – AND they can run notebook computers for hours longer than lithium-ion batteries.

Total jewelry demand fell in 2006 by nearly 5%, largely due to a slump in demand from India due to higher prices. Demand in China grew by 16%.

Photographic demand continued to fall, decreasing by 10 percent in 2006 to 145.8 million ounces.

Silver ETF Is Growing By Leaps and Bounds

You probably know that the gold exchange-traded funds, including the GLD, are major sources of new demand for gold and they are driving prices higher. Well, the silver ETF, the SLV, is a also roaring success. It has 139,067,911.100 ounces of silver – [3] that’s way, way up from the 21 million ounces it started with back in April of 2006.

China Mines for Precious Metals Profits

Trading in spot and gold and silver futures started on the Shanghai Gold Exchange in June. Now, the Shanghai Futures Exchange is about to launch gold futures. [4] It would not be surprising to see silver futures start to trade on the Shanghai Futures Exchange, giving China's 1.3 billion capitalists another way to invest in the metal.

The Chinese have already gone gung-ho for stocks – Shanghai’s stock market recently hit a five-year high[5] – and Chinese demand for silver could be an explosive force in the market.