This week, an astute customer emailed Provident asking about the rarities of gold and silver.
I extensively researched the rarity and the scarcity of each metal. I studied how many tonnes of both silver and gold have been mined and subsequently consumed. What’s interesting is that I discovered information to support nearly any stance on the comparison of the two metals’ availability and accessibility.
Most studies agree gold is overall the more rare of the two metals; however, above ground silver is actually more rare than gold. Estimates report gold is 5-7x more abundant above ground than silver.
Beneath the surface, silver is approximately 19x more abundant than gold.
To date, over 1.5 million tonnes of silver have been mined. Industry has consumed 90% of mined silver, leaving a huge opportunity for a commodity shortage in the years to come.
Mining for silver specifically has dramatically declined. In 2017, the majority of silver is mined as a byproduct of other metals, like copper and lead. For every 12.5 tonnes of earth (27,600 lbs), there is 1 gram of silver. This ratio combined with the extraordinary low spot price of silver makes mining the precious metal less profitable and less appealing than many other metals. This mining shortage has the potential to create an enormous industry shortage of silver.
So then, why is the spot price of silver so low? Why is there a 68:1 gold to silver ratio when it seems gold is more easily mined and doesn’t face the same consumption habits as silver?
I share the theories of many others who believe in silver spot price is controlled by a combination of a few factors; I believe price manipulation is alive and well. Several large banks are currently under fire for their roles in verified price rigging. I believe more banks will be prosecuted in the near future, as well.
In addition to banks, industry has a huge interest in keeping silver prices low. By undervaluing the metal, their supply costs remain low and profits high.
I know I harped on this last week, but I do believe silver has a marketing problem, as well. If the general public truly understood the investment opportunity silver presents at current spot prices, I think we would consistently be sold out of silver.
So, while gold is more rare below the surface, silver is more rare and undervalued above ground. Silver has been operating at a supply deficit for many years, and I think it’s only a matter of time before spot price reconciles with the true value of this beautiful bullion.
Share your thoughts on silver! Did you know silver is more rare above ground than silver? Where do you see the price of silver going in the next 5 years? 10 years?
If you want a breathtaking way to efficiently stack your silver, check out the new 2017 10 oz Silver Canadian Magnificent Maple Leaves, now available for pre-sale.
Happy Stacking!
-J
Philip Morris is also holding on to a estimated 6.9 million ounces of silver. That has something to do with the prices today. It will only go up when people like this allows it to and that’s bull
Like most things in life, driven by fear….
When England had the Brexit vote silver went from around $14 beginning of 2016 to $21 by August 1. In a short 7 months silver increased 50% on a fear of an event not to happen for years. By end of 2016 price back down to $16… In 12 months saw a 50% increase and a 24% decrease to finish up 14%.
Trump becomes President, announces a travel ban from a few countries, fear sent silver from $16-$18 up 12.5%…. Nothing to do with actual physical supply and demand but perceived safeguards.
Same with oil, food, water, energy, etc…
I like wiki, it offers some great historical data;
https://en.wikipedia.org/wiki/Silver_as_an_investment
Can these numbers be “fixed” ? Absolutely. Unless some one can physically see and document each hoard, its a sight unseen sorta thing.
Since silver is lower priced, I can imagine that its uses are used a lot more than gold. Where gold plated electronics may cost more – the same can be done with silver at close to 70 times less.
Pricing might be related to politics in the end, and my gripe is with the ratio between gold and silver. The only way for silver to get the rarity tag is for some organization to try to make a major purchase and that amount is currently unavailable. Then, heads may turn.
Like anything else, sources will end drying up. There ought to be a focus on silver as the stock market. If there is a “projected harvest” of a precious metal and if the precious metal fails to meet that goal, silver then has a 3 month window at a new bottom pricing.
Indicators are getting a bit tougher to analyze and predict when silver is going to climb by a significant amount. Most “major” climbs in silver is about seventy-five cents or more an ounce. Watch this happen IF the Feds in the USA raise the interest rate in mid March. Then silver will head back a positive direction, at least for several months.
Honestly? I don’t see a major increase in silver spot prices. It took a HUGE effort by the Hunt Brothers, and silver climbed how much? To near 40$ USD? I think when the US government issues a declaration that cull coins are allowed to be melted and used for other purposes – is a state to where the availability of silver has been acknowledged and silver would start to climb in an almost constant nature, at least a $1.00 or more an ounce per year. The gap of gold to silver would be forced to be at a closer ratio, probably at 50:1 or so. Then let the political and corporation greed commence once again.
The gold-to-silver ratio is so mind-blowing to me. That’s a great Wiki article. I really wish I had a time machine and could jump 20, 50, 100 years in the future and see where the ratio lies.
-J
Greatly stated! I highly agree silver to be considerably undervalued and this places the commodity in a position to be prone to explosive gains once it’s true value becomes more apparent.
Silver is truly a Hold and Wait investment.
It is indeed. I just have such a hard time waiting! 😀
-J
I stack silver and have more silver than gold due to my budgets. That being said, I read and hear all the time that silver is being “consumed or used for industry”, solar power and the such! I cannot believe that story at all! Metals can be recycled! We see how hobbyist are recycling electronic parts to gain a few grams of gold these days. Recycling of silver can and will occur if it’s that sought after.
Another thing to note is that over seas silver mines rarely publish accurate mining stats for their own financial gains! I think silver stackers need to note that fact as well! I believe that silver is over over priced at the moment!
Well, one difference with silver is it is highly consumed in ways that aren’t recyclable- like medicine. But, I do agree, there are stockpiles of discarded electronics which could be recycled. I know China started a recycling program to repatriate silver and gold from electronics.
Also, that’s an interesting point about the overseas mines. I’d like to do some more research on that.
-J