Redefining Precious – Other roles for metals besides currency

Gold and silver are usually known for their uses as monetary vehicles. Their value is dependent on the factors affecting this fundamental, but gold and silver should not be treated equal. The percentage of demand that comes from their monetary uses is different for these two precious metals. Each has a different role as a currency, which means each one is affected differently by monetary occurrences such as interest rate movements, money supply changes, and factors affecting foreign lending markets. On the other side of the coin are the industrial and commercial uses. The demands are essentially flipped here, which means that the demand difference derived from their uses as a monetary vehicle and has an inverse relationship with the demand difference that comes from their industrial and commercial applications. Understanding these other uses and the discrepancies in sector demand may be a good tool in finding possible investment opportunities when trading metals.

Gold and silver are very ductile and malleable which makes them easy to work with when producing jewelry. They also have a high luster which gives them that wonderful shine. For these reasons, these precious metals are some of the most frequently used metals in the production of jewelry. Jewelry demand as a percentage of global demand is 58.4% and 18.3% for silver. India is the largest market for gold jewelry. Their jewelry demand equaled 469.7 tonnes or 22% of world jewelry demand. The next closest consumer of jewelry is China at 326.7 tonnes or 15% of global jewelry consumption. This is a telling comparison indeed; especially when you put those numbers with investment demand figures. Investment as a percentage of global demand is 30% for gold and 10% for silver. That leaves 11.6% for gold and 71.7% for silver as percentages of demand left for industrial and commercial uses.

The percentage of silver that’s used for means other than monetary policy is significantly greater than its yellow cousin gold. Silver has a number of uses other than jewelry that include: photography bearings, medicinal, water purification, tableware, batteries, soldering, dentistry, circuitry, and control rods for nuclear reactors. Of those uses, tableware and photography make up the largest percentage of demand. Together they account for 21% of total demand, while the rest of the industrial applications combined make up 51% of demand.

Even though gold has less industrial and commercial applications than silver, it still has a number of uses other than its role as a currency. Some of those uses include: electronics, solder, embroidery, dental, art, medical and satellite protection (good reflector of electromagnetic radiation). Of those uses, electronics and dental make up the largest percentage of demand other than jewelry. Together they account for 80% of industrial and commercial consumption other than jewelry. As a percentage of total identifiable demand, electronics and dentistry make up 9%.



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