© Nik Kalsi
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First, it is important to understand that, while silver is a precious metal, it also holds a significant attribute which other precious metals lack. Silver is used as an industrial metal, whereas other precious metals like gold are primarily used for investment purposes. As a matter of fact, silver's electrical and thermal conductivity means it is used in everything from power generation to consumer electronics. Although silver does partly get used for investment purposes, it is definitely not to the same extent as gold. So when we talk about silver's relationship with China, we need to focus on the fundamental drivers or reasons for silver's demand.
Looking at the catalyst for silver demand in the future, I should mention the Chinese energy sector. China plans to expand its usage of solar power in the nearest future, and silver is the key material used within photovoltaic (PV) generators to produce solar powered energy. To explain this another way: a gigawatt of solar power requires 3 million ounces of silver. China is expected to roll out enough PV Generators to produce 100 GW of solar power by 2020. This will require 300 million ounces of silver for China's energy sector alone – that is more than a third of the annual global production of silver. So to answer your question, is the Asian nation still a commodity market mover? If you take the above into consideration and China follows through with their ambitious solar energy plans, then the answer is yes, I believe China's future demand for silver will still play a pivotal role in supporting silver prices.
Barrick Gold Corporation, the biggest gold mining company with about 888 million ounces of silver in their reserves, is yet to receive another file for its massive Pascua-Lama gold and silver project. According to Chile's environmental regulator SMA, inspections taking place between the 2013 and 2015 had revealed ten new infractions. Can you evaluate the impact of postponing the precious metal mining in Argentina?
I doubt the current situation Barrick gold is facing in Argentina will have any major impact on the future prices of either gold or silver for that matter. However, it will impact Barrick gold's stock price, as it is normally what happens when such major programs are put on hold. The fundamentals relating to Barrick Gold (ABX) are currently looking very dismal. Postponing the precious metal mining project in Argentina will result in investors losing confidence in the company.
From an investor's perspective, investors buy stocks in a company expecting their capital to increase in value. When investors do not see a return on their investment, this just triggers selling of the stock, which is exactly what I would expect in this scenario. Alongside that, Barrick Gold is also currently facing challenges in various areas of its business such as negative operating cash flow, generally disappointing historical stock performance and high debt management risk which creates a lot of uncertainty. Generally, the latest fundamentals do not do Barrick Gold any favors in the short-to-medium term.