Central banks of countries classified as emerging markets are the biggest official silver buyers for the past year. In 2013, the overall net central banks’ purchases were the largest since 1964. Top bankers in the emerging markets apparently are well aware that the only protection for their country’s deposits against their own money printing is to possess precious metals such as gold and silver.
Over the past 12 months, net purchases of silver by the central banks averaged 20% of the annual supply, according to a report. Yet, silver buying by central banks is still weak in comparison to gold buying. That is because silver is cheaper and gold is a better store of value.
However, the industrial demand for silver compensates the difference. You can see that central banks have stopped selling and started to buy silver since global financial crisis started. This trend is expected to increase even more in the future.
Peru is one of the top silver mining countries. It is also known as “Saudi Arabia of silver” due to its rich assets. It produced nearly 110 million ounces of silver last year and is one of the few countries to add to its silver reserves over the past decade. Silver investors from the US buy into Peru’s white metal through mining company shares and ETF.
China is the most significant emerging market at the moment. The Chinese silver demand is expected to jump as much as 10% in 2013. Metal consumption could climb to 7,700 metric tons after 6% to 8% gains in 2012. Approximately 33% of the country’s demand comes from jewelry and coins. The rest comes from industrial use like photography, solar and electrical appliances. Investors from China are buying more silver despite the sluggish economy seen in 2012.
Chinese investors prefer hard assets such as silver, especially when it’s cheaper than gold. Therefore less funding is required. Despite the increased domestic supply the silver demand grows continuously. This is because the economy is expanding and the industry is reviving. Therefore all the emerging markets are in need of the versatile and yet precious metal. Silver is store of value and functional commodity at the same time. That is why it is essential for the emerging countries’ reserves.
