Silver hit an all-time record high price of $49.45 per ounce in 1980. Thirty-one years later, the metal’s logging multi-decade highs. Suddenly that 1980 high doesn’t look so preposterous. Silver spot prices rose as high as $39.25 in trading yesterday. That puts silver up more than 27 percent since the start of year, and it brings the metal within 26 percent of its 1980 record high.

Silver would have to log gains of 50+ percent this year to break its record price. That’s a big gain, but it’s far shy of last year’s 76 percent gain. The phenomenal run has been underpinned by inflationary fears, as investors dump paper currencies for finite physical commodities. Silver, too, has looked particularly attractive as the price of gold ($1,400+ per ounce) puts it out of reach for many individual investors.

March alone saw the price of silver up more than 11 percent with much of the demand coming from China. Not only is the growing middle class in China buying silver as a store of value, industrial demand for the metal has risen dramatically.

“We do see a lot of demand for silver from China, so we think silver used in solar panels have increased,” Natalie Robertson, commodities strategist at ANZ in Melbourne, tells Reuters. “We think China will have a lot of demand for silver in the medium to long term.”

Solar power is increasingly looking like the go-to renewable energy source as the world’s opinion on nuclear power sours. Because solar panels, which include small amounts of .9999 fine silver, are relatively quick to install, Japan itself is expected to turn to solar as it seeks to relieve pressure on the country’s power grid.

A number of noted analysts and investors have called for silver to break its 1980 highs by the end of 2011. As I wrote on Monday, Eric Sprott, the chief investment officer at Sprott Asset Management, has been particularly vocal. Sprott doesn’t rule out the possibility of $200 silver as part of what he sees as a correction in the off-balance silver:gold ratio. Putting money where his mouth is, Sprott’s got $1 billion or so of client capital and his own cash invested in the metal.

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