Credit: Maxpixels

The US debt crisis and European economic woes have sent the silver trading industry into turmoil as prices kept on declining through much of August. Traders and investors are grappled with fear since the current crisis could cause a decline in demand for industrial silver. Another interesting point that has come forward is the growing inflation rate in China, hindering a country’s growth that has until now ceased further recession dips along with Brazil and other developing countries.

Across global markets, Friday and Monday have shown renewed improvement suggesting investors nature to risk probabilities. Silver as an industrial metal is demonstrating a reestablished interest, helping to stabilize prices.

Silver’s role in buoying prices and acting as an asset depends much on its role as an industrial metal. Silver investors need to look deep into this factor of silver as a commodity in the industrial sector.

Despite the anticipation of another recession, optimism still rules in favour of silver. There would be increasing demand from developing countries for silver intended for agricultural, industrial and energy-based goods.

Even though investment markets eat a major part of the pie share in silver demand, industrial use of silver is still the largest market, advancing from 349.7 million ounces in 2001 to 487.4 million ounces in 2010.

Presently, industrial demand for silver is 50% but is expected to increase to 70% by the next decade.

Silver’s role as an industrial commodity acts as an excellent reflector of light, heat transfer, conductor of electricity and a good lubricant, alloy and catalyst. Therefore, it makes a great material in applications from the electrical and electronics industry, which occupies the largest share of global silver industrial fabrication. Moreover, progressive techniques in solar photovoltaics and its ability to effectively conduct electrical and thermal energy are making it an important raw material in the solar power industry.

The demand for silver in solar photovoltaics in both US and Asian markets will continue to grow in the coming decade, with an increase of 12% in the US and 11% in Asian markets by 2015.

The increasing use of solar power as alternative energy has augmented demand for silver which could double from 50 million ounces consumed in 2010 to over 100 million ounces by 2015. In 2011, the demand was expected to grow to 70 million ounces, increasing 40% from last year.

The increasing demand for traditional and industrial silver will have a positive medium to short-term impact. It is expected that silver will break the $100 an ounce barrier by the year-end.