Follow the gleam
SILVER FLORENCE PLACE
It's the devil to polish, but we still use a silver coffee pot for breakfast,' a banker friend told me recently over dinner. 'We had it valued just after the war,' he continued, conscious of slight boastfulness, 1£500-1 was a bit surprised.' Fixing him with a glassy eye I pointed out that it was probably now worth a good £5,000. He boggled; there was no doubt about it, he boggled. And the coffee pot now reposes in the vaults of his—eminent—bank.
This is increasingly the fate of old silver. A friendly, finely moulded and engraved, Queen Anne coffee pot, made to please the eye and grace the family table, has no place in the life pattern of the 1960s. Think of plunging £5,000 into the Fairy soap suds every morning after breakfast. In addition to the hundred pounds or so at risk through an accident on the draining board,. there is the question of insurance. This is extremely expensive with the boom in the burglary business. But the piece is not rare or exceptional enough to merit a place in a museum. The only answer is to tuck it away in a strong room, where conveniently it will not have to be polished—but what an insult to the silversmith's craft!
With the laws of supply and demand at work it may seem surprising that there is still sufficient demand for fine old silver to tuck away in the vaults, to justify prices often in the thousands for ordinary eighteenth century pieces of table- ware. There are, of course, silver collectors who search out the work of their favourite silversmiths and will pay high prices to add a fine example to their collection. But today's prices, which are even making dealers confused and uneasy, are more a reflection of the demand created by 'investors' in old silver. They believe, perhaps with justice, that a Lamerie salver in the vaults of the bank is a very good investment.
For the market in old silver is only one side of the crazy situation of silver as a metal. Over the last thirty years the industrial use of silver has increased by leaps and bounds. It is vital in photography, having qualities of light sensitivity for which no alternative can be found. It is now also used as a conductor for the tiny precision components used in the electronics and space industries. Again there seems at present to be no practical alternative, and the price of silver is not anyway a significant factor in total costs.
Last year industrial consumption exceeded mined production of the metal by roughly 100 million ounces—or at prices current this sum- mer by about £100 million worth of silver. The steep increase in industrial use of silver is expected to continue; this is only natural con- sidering the growth potential of the industries in which it is used.
At the same time, luckily, the monetary use of silver has been progressively abandoned. This has meant that huge quantities of old coins are available to be melted down and used to bridge the gap between mined output and industrial needs. The us Treasury is currently offering 2. million ounces of old coins for sale every week—though only to genuine consumers within the United States. There are also huge hidden supplies of silver in India and the Middle East. In these countries peasants have for more than a century hoarded silver, mainly in the form of small trinkets, as an insurance against drought, starvation, revolution, or other un- controllable disasters. It is estimated that there are 4,000 million ounces of silver in India alone—enough to supply world industrial needs for over ten years at today's consumption levels.
This silver is being smuggled out of India on a very large scale. It travels in small fishing boats across the Persian Gulf to Dubai. From there it can be officially exported to any country in the world. British 'imports' from Dubai in the first six months of this year totalled around £30 million—which substantially contributed to upset our balance of payments situation.
Thus there are huge supplies of silver knock- ing around, liable to be melted down and put to a new use when the price is good enough. How- ever, there appear to be strict limits on the expansion of new mined output. Silver is gener- ally produced as a by-product of lead and zinc mines. The value of the silver is generally a nice extra perk, but not an important considera- tion in the economics of a mine. Mining con- cerns are already teetering on the brink of a world surplus for these two metals—there is no incentive to step up production.
There is thus a general consensus of opinion among those who have studied the economics of silver that in a matter of five years or so the failure of mined output to keep pace with con- sumption will begin to induce an acute shortage. The price may well double or triple from today's level. This has led to yet another com- plication; massive speculation in the metal. Between June 1967, when the us gave up con- trolling the silver price for monetary reasons, and June 1968 the price of bullion doubled. Since June speculators have got cold feet and roughly half this increase has been cancelled out.
Nevertheless silver hoarding is here to stay. Speculators looking for a fast buck have dropped out of the market as the price tumbled. But those who are contented to wait for the long term price increase are still buying bard. Besides, it has begun to edge in on gold as a hoarding medium—for the battle between South Africa and the us Treasury has cast doubts on an effective floor price for gold being main- tained.
If it is worthwhile to hoard silver bullion, how much more worthwhile is it to hoard old silver. While its price is likely to double or treble in the next ten years on account of its metal value alone, there is also the rarity factor. This is steadily increasing the value of all works of art—as an expanding demand meets a fixed supply. Thus the Queen Anne coffee pot in the vaults of the bank should increase in value (a) as a lump of silver and (b) as a rare work of art. A better investment than bullion!
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