Ron S, Richard; There are several bearish indicators in silver. They are as follows.
1 Photgraphic; The new format uses less, and it will gradually displace the older formats over the years(never completely though). On a ten year scale I see this down by 50-70% due to 2 below.
2 Digital cameras; At this instant a high reolution digital camera is worth $25,000. However the parts are very susceptable to volume use and yield improvement and higher resolution will occur at a rapid pace over the next 5 -10 years. Right now TV type of resolution is $250 up. This will drop to the $50 range in a year or two. The $25,000 cameras will fall to $500 and new $25,000 cameras will emerge with higher resolution and faster speed, etc. This pace will continue. With digital you only have the upfront costs, all else is fixed, nothing to buy or print as long as your TV is OK. You can now print on various ink jets for 50 cents a page any color picture. The glossy paper is more. But you get the idea. They will get better and better and take more and more share as time goes by. Silver will always be better, as it has near atomic resolution, but the digital will take the bulk market over the next ten years.
3 X-Rays. A large current use is xrays, even now solid state detectors are impacting the use of film in large centers. Low doseage and display on a screen, then print to transparent plastic with a xerox machine. Silver is better, but the scanners get better each year and in ten years will take almost all of this business. Ditto for industrial imaging for welds etc. The scanners will get this business too. Could be a 60-80% loss of this market over ten years.
4 Silver contacts for relays. They have been going over to solid state for the past 25 years, bit by bit. They will never eliminate silver, but slowly and surely shring its uses. This use will stay stable as market expansion and loss of share are more or less equal.
5 Connectors. Still silver is the best, and it will keep this small market.Slow expansion over time in pace with economy.
6 Jewellery. The only expanding market for silver. As China gets to a freemarket they will consume more and more silver for adornment.This will expand at 4-8% per year and will almost completely offset the drop on photographic uses.
It is not a black picture, but one of steady state as one use goes to another. The use of other metals will not displace silver for adornment, and that use will steadily expand as the others shrink. I see silver as a stably priced metal, with only a slight drift up and down. I also see it fully decoupled from gold. Silver production has also fallen a bit and if this continues, silver may well trend upwards, gradually It will not have a $50 bunker hunt rally. Now the 5 trillion ounce inventory as dower silver in India(that is what killed Bunkies plan) has been mobilized and there will never be another such run up again.
Bill Jackson |
