This is part of a letter to Midas regarding China and their push to buy commodities and strategic metals.

It appears that China is thinking long term and stocking up on strategic metals and other commodities. Rather than just watching fiat currencies go up in a puff of smoke, China is buying strategic metals and commodities. With almost $2 trillion in foreign currency reserves, China could be buying these commodities for a long time. The question becomes, what is the next strategic commodity that China will start buying?

Other than oil which China is stocking up on, what could be more strategic than silver? If you want to fly a plane, high performance silver bearings are used in the jet engine. If you want to operate a car, over 40 silver tipped switches are used to start the engine, activate the power brakes, steering, windows, etc. You will need silver in the printed circuit boards to control the operation of planes, cars, electrical appliances, security systems, cell phones, telecommunication networks, etc. The critical uses for silver seem almost endless, especially because the price of silver is currently so inexpensive.

Let’s assume the U. S. Geological Survey is correct with the world’s total proven silver reserves of 270,000 tons. There is approx. 15 years left of silver at current mining rates. If you are thinking long term and you are China, why would you not start purchasing silver for strategic purposes right now? The Chinese have already started purchasing copper and soybeans. If you want to manufacture for the next 20 to 30 years, the near term purchase of silver over a considerable length of time would make sense.