By Kevin Grewal, editorial director at www.SmartStops.netNEW YORK ( TheStreet) -- In the past year, silver outperformed gold, posting exceptional gains. There are many indicators suggesting that its upward trend will likely continue well into the current year. Silver's appeal and exceptional performance will likely be driven by three factors. The first being an increase in demand by investors; the second, an increase in industrial demand; and finally, the supply for the precious metal is slowly diminishing away. Silver offers many of the same benefits as gold, including being a play against the dollar and offering protection against inflation. Additionally, many metals experts state that silver is not considered to be overbought when compared to gold and in fact, valuations are highly attractive when compared to gold, making it more attractive to investors. As economies around the world continue to grow and emerge out of recessions, the industrial applications of silver will likely add to its attractiveness. In fact, the latest data suggest that nearly 55% of total silver fabrication is used for industrial purposes. The reason behind this is that silver has unique industrial characteristics that prevent it from corroding, allow it to maintain a luster with minor polishing and enable it to have a high conductivity rate. As a result, the metal is commonly used in the electronics space and can be found in plasma display panels and printed circuit boards. Additionally, the precious metal is used as an additive to the lining of some refrigerators, for food storage containers, in hospital equipment and in alternative medicine as an antiseptic and to treat fungal infections. Both the tech and medical device sectors are expected to see growth in the coming year, which will likely spur demand of silver.
From a supply perspective, the United States Geological Survey states that silver is nearly twice as rare as gold in the long term because it is not recycled at the same rates as gold. Also, at current consumption rates, all of the silver that is in the earth's crust will diminish away in the next 25 years. This will likely put supply pressures on the price of the metal. A combination of these factors will likely provide support to silver prices; the following ETFs should reap the benefits:
- iShares Silver Trust ( SLV), which physically holds silver bullion and closed at $18.27 on Wednesday. PowerShares DB Silver Fund ( DBS), which holds futures contracts in silver and closed at $33.16 on Wednesday. PowerShares Ultra Silver ( AGQ), which seeks to gain twice the performance of silver bullion and closed at $68.06 on Wednesday.