Gold vs. Silver, availability and long-term price predictions

1jester

This subject has been touched upon in a few threads but so far only as an aside, and I'd like to see a discussion on the merits of silver vs. gold over time, and the actual physical amounts available for investment worldwide. I've read a number of times that the actual amount of above-ground silver is significantly less than the amount of gold in the world. If that is true, why wouldn't there be good cause to believe that the price of silver will eventually surpass that of gold? I know this might seem like a radical and unbelievable fantasy to most people, but if the fundamentals say that there's much less silver available than gold on the planet, and with silver being consumed at a faster rate than gold (which isn't consumed at all), why is gold worth 70 times more than silver? I know, it's fluctuated down to 50:1 in recent times, which is way out of place considering its roughly 15:1 historical ratio in ancient times up to the last century. But why shouldn't silver be much more valuable than gold, considering its industrial usefulness and present scarcity? Does anyone see this happening?

bigmarty58

IMO Silver will someday become worth more than we now want to admit. The above ground stock of Silver is much less than Gold now. We use Silver and hardly use Gold. I could see 10:1 ratio in the next decade, just my opinion.

Robert

DoubleEagle59

Silver has got to have massive upside potential due to:

1. current 'high' Ag:Au ratio of 61:1 which should eventually get to anywhere between 15:1 to 35:1,

2. current undervalued price due to large scale silver shorting,

3. very probable near future increase in price due to lack of silver stockpile and increased industrial demand.

roadrunner

I would agree on the silver shorting. The last number I saw published by the Office Comptroller of the Currency (OCC) on silver otc derivatives indicated $190 BILL or an amount equivalent to 17 yrs of annual silver production (681 MILL oz in 2008). Gold derivatives were on the order of 5 yrs production. Silver "bets" win.

After spending hours one night trying to find some useful data or estimates on the usage of silver since records were kept I ran across what I felt was sensible data. One researcher felt that 95% of all silver ever mined has been used. That leaves 5% for us today. Their estimate was that about 48 BILL ounces of silver had been mined throughout history (about 10X the amount of gold). 5-10% leaves one with 2-6 BILL ounces today. The high estimate I found felt that 24 BILL ounces of silver still remained, of which most is not available to the market as it is socked away in jewelry and art formats. Of those few billion ounces available to the market, how much of it is actually physically here in the USA? No matter how you slice it silver is at most 5X to 10X as available as gold. And getting more silver out of the earth's crust will be difficult considering the low fruit has already been picked, plus most of it is in byproduct of other mining. Until base metal mining gets back to normal don't expect anything but lowered silver production as well.

2 interesting facts from that article. The historic ratio of mined silver to gold is 10.5 to 1. The ratio of above ground gold to silver is 5.88 to 1. Both would suggest that the current GSR of 61 to 1 is a little out of whack. And $190 BILL in silver derivatives (>17X the value of annual world supplies) doesn't hurt when price supression is your goal. The fact that those are hedged with cheap options doesn't really change anything.

Eventually silver prices will follow available supply.

roadrunner

Norseman88

<< <i>I would agree on the silver shorting. The last number I saw published by the Office Comptroller of the Currency (OCC) on silver otc derivatives indicated $190 BILL or an amount equivalent to 17 yrs of annual silver production (681 MILL oz in 2008). Gold derivatives were on the order of 5 yrs production. Silver "bets" win.

After spending hours one night trying to find some useful data or estimates on the usage of silver since records were kept I ran across what I felt was sensible data. One researcher felt that 95% of all silver ever mined has been used. That leaves 5% for us today. Their estimate was that about 48 BILL ounces of silver had been mined throughout history (about 10X the amount of gold). 5-10% leaves one with 2-6 BILL ounces today. The high estimate I found felt that 24 BILL ounces of silver still remained, of which most is not available to the market as it is socked away in jewelry and art formats. Of those few billion ounces available to the market, how much of it is actually physically here in the USA? No matter how you slice it silver is at most 5X to 10X as available as gold. And getting more silver out of the earth's crust will be difficult considering the low fruit has already been picked, plus most of it is in byproduct of other mining. Until base metal mining gets back to normal don't expect anything but lowered silver production as well.

2 interesting facts from that article. The historic ratio of mined silver to gold is 10.5 to 1. The ratio of above ground gold to silver is 5.88 to 1. Both would suggest that the current GSR of 61 to 1 is a little out of whack. And $190 BILL in silver derivatives (>17X the value of annual world supplies) doesn't hurt when price supression is your goal. The fact that those are hedged with cheap options doesn't really change anything.

Eventually silver prices will follow available supply.

roadrunner >>



At least someone took the time to do their homework instead of babbling on about Silver shooting up or collapsing with no facts to back up their statements.

mkman123

nice facts Roadrunner. Another member Deadhorse mentioned exactly what you said a while back to me privately! He was right I guess!

1jester

Some recent articles regarding the scarcity of silver and possible price inferences:

Text1

Text2

Text3

I think it's hard to argue against these apparent facts; i.e. the true scarcity of silver vis-a-vis gold and the possible price consequences in the future. I believe that eventually, that is, within the next 10-20 years, the price of silver will at least match that of gold.

roadrunner

Silver is an important metal in industries and especially defense. If it came to shortages the govt would likely do something along the lines of making it much harder to buy, altering the current trading mechanisms/markets or simply preventing private ownership.

Since digging up those facts above I've since run across of USGS estmates and they show silver running out in approx 17 yrs. But then again, they've been saying something along those lines for just as long....lol. The USGS's estimate of remaining below ground silver is still far short of the high estimate I used above (24 BILL ounces). Even if one used the estimate of all the silver ever mined, and assumed it was all still around to be reclaimed, it would still only be around 10X the supply of gold (approx 5 BILL ounces).

But it could be decades before a legitimate silver pinch is actually felt....or within a few years. It depends on which above the inventory numbes is the most accurate. The 0.5 BILL ounce number that Ted Butler and others throw around is the low side side estimate. That wouldn't even cover a single year of world annual production. That seems a bit unlikely imo. Basically that would state that 99% of all the silver ever mined has been expended.

roadrunner

cohodk

<< <i>

<< <i>I would agree on the silver shorting. The last number I saw published by the Office Comptroller of the Currency (OCC) on silver otc derivatives indicated $190 BILL or an amount equivalent to 17 yrs of annual silver production (681 MILL oz in 2008). Gold derivatives were on the order of 5 yrs production. Silver "bets" win.

After spending hours one night trying to find some useful data or estimates on the usage of silver since records were kept I ran across what I felt was sensible data. One researcher felt that 95% of all silver ever mined has been used. That leaves 5% for us today. Their estimate was that about 48 BILL ounces of silver had been mined throughout history (about 10X the amount of gold). 5-10% leaves one with 2-6 BILL ounces today. The high estimate I found felt that 24 BILL ounces of silver still remained, of which most is not available to the market as it is socked away in jewelry and art formats. Of those few billion ounces available to the market, how much of it is actually physically here in the USA? No matter how you slice it silver is at most 5X to 10X as available as gold. And getting more silver out of the earth's crust will be difficult considering the low fruit has already been picked, plus most of it is in byproduct of other mining. Until base metal mining gets back to normal don't expect anything but lowered silver production as well.

2 interesting facts from that article. The historic ratio of mined silver to gold is 10.5 to 1. The ratio of above ground gold to silver is 5.88 to 1. Both would suggest that the current GSR of 61 to 1 is a little out of whack. And $190 BILL in silver derivatives (>17X the value of annual world supplies) doesn't hurt when price supression is your goal. The fact that those are hedged with cheap options doesn't really change anything.

Eventually silver prices will follow available supply.

roadrunner >>



At least someone took the time to do their homework instead of babbling on about Silver shooting up or collapsing with no facts to back up their statements. >>



Agreed. Thanks for sharing your findings. It does not however mean silver will or needs to go higher. The price will go to wherever it wants to go which will be based on a combination of psychological, economic and fundamental reasons. IMHO, in that order.

CoinCrazyPA

<< <i>

<< <i>

<< <i>I would agree on the silver shorting. The last number I saw published by the Office Comptroller of the Currency (OCC) on silver otc derivatives indicated $190 BILL or an amount equivalent to 17 yrs of annual silver production (681 MILL oz in 2008). Gold derivatives were on the order of 5 yrs production. Silver "bets" win.

After spending hours one night trying to find some useful data or estimates on the usage of silver since records were kept I ran across what I felt was sensible data. One researcher felt that 95% of all silver ever mined has been used. That leaves 5% for us today. Their estimate was that about 48 BILL ounces of silver had been mined throughout history (about 10X the amount of gold). 5-10% leaves one with 2-6 BILL ounces today. The high estimate I found felt that 24 BILL ounces of silver still remained, of which most is not available to the market as it is socked away in jewelry and art formats. Of those few billion ounces available to the market, how much of it is actually physically here in the USA? No matter how you slice it silver is at most 5X to 10X as available as gold. And getting more silver out of the earth's crust will be difficult considering the low fruit has already been picked, plus most of it is in byproduct of other mining. Until base metal mining gets back to normal don't expect anything but lowered silver production as well.

2 interesting facts from that article. The historic ratio of mined silver to gold is 10.5 to 1. The ratio of above ground gold to silver is 5.88 to 1. Both would suggest that the current GSR of 61 to 1 is a little out of whack. And $190 BILL in silver derivatives (>17X the value of annual world supplies) doesn't hurt when price supression is your goal. The fact that those are hedged with cheap options doesn't really change anything.

Eventually silver prices will follow available supply.

roadrunner >>



At least someone took the time to do their homework instead of babbling on about Silver shooting up or collapsing with no facts to back up their statements. >>



Agreed. Thanks for sharing your findings. It does not however mean silver will or needs to go higher. The price will go to wherever it wants to go which will be based on a combination of psychological, economic and fundamental reasons. IMHO, in that order. >>



Very well put, I think China and all there mine buying will be a large factor on prices in the near future.

1jester

HereHere is an interesting article on SilverSeek.com regarding the lack of available silver, and therein are some more fascinating articles, as I've linked:

Manhattan Project


Text


Text


Text

cladking

This author thinks a lot like I do.



The silver market is going to blow up in everyone's face one of these days. Governments and
banking have assured that this must happen by allowing low silver prices which help no one but
bankers for generations. They did the same thing to some degree with the oil markets but there
are some substitutes for oil (at least in theory) where there are no substitutes for silver.

The day will come that the commodities markets will default; whether this comes before or after
a critical lack of metal is barely relevent. The amount of silver is just too low for any other outcome
in the long run.

The Hunt's thought that they could corner the silver market in 1978 and they were right. The rules
had to be changed to break them. But the rules can't be changed to create silver out of thin air.
There's already more silver made out of paper than silver composed of metal. Guess which one is
needed by industry and is in finite supply.

cladking

Here's another little thought about silver.

I've long maintained that the ay will come that there is a massive buying panic
in silver. It will come very very swiftly and be very short lasting. It will exceed
all buying panics that have ever been before. One of the mechanisms will be
when the silver longs come to realize their contracts are going to be worthless
because there isn't enough silver in the world to back them. Most people will
walk away in disgust but the bulk of actual contracts are hedging by actual users.
When they suddenly come to realize they don't have the silver to operate their
factories they have no choice but to join and even lead the panic.

One of these days silver will be doing its normal up and down gyrations but in-
stead of plummeting from a high as is typical it will spike. This spike will signal
the start of the buying panic.

1jester

Clad, your link didn't work for me.

I can't but agree with you completely. From all the research I've been doing for the past 9 months, I can't believe the price of silver won't blast off like the space shuttle from the launch pad, never to come down. I wouldn't be surprised to see it match or exceed the price of gold once people understand the fundamentals. BTW, where would one sell 5 kilo bars of silver once the price goes to multiple thousands of dollars an ounce?

Norseman88

<< <i>Clad, your link didn't work for me.

I can't but agree with you completely. From all the research I've been doing for the past 9 months, I can't believe the price of silver won't blast off like the space shuttle from the launch pad, never to come down. I wouldn't be surprised to see it match or exceed the price of gold once people understand the fundamentals. BTW, where would one sell 5 kilo bars of silver once the price goes to multiple thousands of dollars an ounce?


>>



5 Kilo bars???? I've never seen a Silver bar of that size please post a pic sometime.

As for disposing of a bar that size you are looking at roughly a 160 oz. bar so it shouldn't be much harder than disposing of a 100 oz. bar although I suppose it would depend on the price of Silver at the time. I have disposed of most of my bigger Silver bars and now I only have a 100 oz. Engelhard extruded and a 104.52 oz. Homestake mine also an old poured 50 oz. Engelhard.
The bulk of my holdings are Eagles and Maples along with a little over 1,000 oz. in 1 oz. generics and roughly 200 Engelhard 1 oz. bars and prospectors. I've still got quite a bit of 90% mostly Walkers and Mercury dimes and 1,000 oz. in A-Mark old style 10 oz. bars.

roadrunner

...it does not however mean silver will or needs to go higher. The price will go to wherever it wants to go which will be based on a combination of psychological, economic and fundamental reasons. IMHO, in that order.

I'd put the price of gold in that list as well. Silver generally follows the price of gold. On data from back in the summer, gold and silver had a 92% correlation over the previous 1500 days. The number would have been higher if not for the smash down in summer/fall 2008 when silver decoupled from gold. Regardless of any other reasons, if gold takes off, silver won't be far behind. Besides being the poor man's gold, it has considerble use in industry.

roadrunner