Silver is now rarer than gold and will be for all of eternity. From this point forth we work from current silver production alone and, from this point forth, demand will outstrip production without exception. Can you imagine what that means for the future price of this, indeed, precious metal? Forget about the popular expression: ‘Got gold?’ The much more important – and potentially more profitable – question to ask these days is, ‘Got silver?’
The original article by Michael Trudeau has been edited here for length (…) and clarity ([ ]) by munKNEE.com to provide a fast & easy read.
Silver in Crises
The crises deepen. What crises you ask? Well, starting about sixty years ago, we began to accelerate our usage of silver for industrial purposes [and] as the great industrial complex known as America grew, so did it’s appetite for silver and other industrial metals. In fact, it grew at such a pace that we devoured the above ground stockpile of silver at such a rate that it is now gone. That’s right, what took the entire world over five thousand years to acquire, was used up in just six decades, and the above ground stockpile has been completely eliminated.
a) Increased Demand
Silver differs from gold in several important ways. Most notably is that unlike gold, silver gets used up and is then gone forever. Almost all of the gold ever mined in mankind’s history is still here. We don’t really use gold for anything other than money or as a store of wealth and for decoration like jewelry. Silver gets used in all kinds of industries. It’s natural antibiotic properties make it a wonderful instrument in the medical field. It is used in military applications; it’s used in all kinds of electrical switches, relays, and batteries. It’s used in water purification systems and paints, and as a primary component in the photographic industry. Silver doesn’t corrode and has excellent thermal conductive properties. Silver, like gold, has also been used, [and continues to be used] as a monetary instrument for centuries. Moreover, as India and China continue their unparalleled advance into joining the ranks of the industrialized world, the situation will be further exacerbated.
As if the dramatic increase in industrial demand were not enough of a problem, the plot thickens! Silver is now being rediscovered as an investment vehicle… [and the introduction of a good number of ETFs over the [past 3 – 5 years] has pulled an incredible amount of silver off of the market.
b) Constraints in Supply
The reason we cannot “fix” the problem by mining more silver is the cost. Today, for example, to mine gold it takes [$550] to mine, refine, and bring to market one ounce of the yellow metal. With gold trading around [$1335] an ounce, that is a profitable endeavor. Silver however, is mined [primarily] as a by-product. In order to mine one ounce of silver as a primary metal, the cost associated with it is similar to the cost of mining one ounce of gold and with silver trading around [$16.55] an ounce and that would not even be close to profitable when the mining costs are factored in. Currently we mine around six hundred million ounces of silver each year while industry consumes about eight hundred and seventy million ounces. Can you see a disparity developing? The market is tightening.
Historical Silver:Gold Ratio Favors Silver
Historically, the silver to gold ratio has been fifteen to one. It would typically take fifteen troy ounces of silver to buy one troy ounce of gold. Today, with silver trading at approximately [$16.50] per troy ounce and gold at around [$1350] per troy ounce, it takes [approximately 82] troy ounces of silver to buy one troy ounce of gold. This suggests an obvious opportunity as once this ratio [reverts to the mean] we can expect silver to approach a price of [$90] per troy ounce [based on the historical 15:1 ratio]. Although this analyst tends to remain conservative in his predictions, it’s not at all unrealistic to expect such [significant] profits when you consider the cost we now must face in order to mine silver as a primary metal.
The Case for Owning Silver Coins
Remember, never again will gold be rarer than silver. Opportunities like these come once in a lifetime. I’d suggest you begin to acquire as much silver as your current situation will allow, and to my own clients, I recommend a position in circulated silver dollars that are held by you in your physical possession. Circulated silver dollars trade without any dealer reporting requirements, so they can be bought and sold privately. They are easily recognizable by just about every American, and they offer a good amount of silver in an affordable, liquid, and portable form.
Industry will continue to use and need silver in ever increasing amounts and with this current economic situation and the printing of money out of thin air, silver only has one way to go and that is up.
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The majority of analysts maintain that gold will reach a parabolic peak price somewhere in excess of $5,000 per troy ounce in the next few years. Given the fact that the historical movement of silver is 90 – 95% correlated with that of gold suggests that a much higher price for silver can also be anticipated. Couple that with the fact that silver is currently greatly undervalued relative to its average long-term historical relationship with gold and it is realistic to expect that silver will eventually escalate dramatically in price. How much? This article applies the historical gold:silver ratios to come up with a range of prices based on specific price levels for gold being reached.