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.
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.
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