Silver, No Longer the Poor Man’s Gold
By Michael Trudeau, Colonial Resources
The crises deepen. What crises you ask? Starting about sixty years ago, we began to accelerate in our usage of silver for industrial purposes. 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. Silver is now rarer than gold! In fact, silver will be from this point forth, for all of eternity, rarer than gold. From this point forth, we work from current silver production alone. And, from this point forth, demand will outstrip production without exception.
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 as a monetary instrument for over fifty straight 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 that’s not enough of a problem, the plot thickens!Silver is now being rediscovered as an investment vehicle. Perhaps most recently, and for sure most notably in Barclay’s new silver Exchange Traded Fund. Barclay’s ETF has recently pulled an incredible amount of silver off of the market. Barclay’s ETF required Barclay’s Global Investors to possess upwards of one hundred and thirty million ounces of silver prior to the approval of the fund in anticipation of investor demand of the ETF. The problem was that the COMEX division of NYMEX only had one hundred and seventeen million ounces of silver totally in all warehouse stock categories combined.
To make matters even worse, COMEX market participants through possession of one hundred and forty thousand silver future contracts at five thousand ounces each already have claims of up to seven hundred million ounces of silver that may not even exist. Barclay’s has acquired approximately one hundred million ounces of silver and counting.
Why can’t we just mine more silver? The reason we cannot “fix” the problem by mining more silver is the cost. Today for example, to mine gold, it takes on average around three hundred and fifty dollars to mine, refine, and bring to market one ounce of the yellow metal. With gold trading around Nine hundred and Fifty dollars an ounce, that is a profitable endeavor. Silver however, is mined as a by-product. In order to mine one ounce of silver as a primary metal, the cost associated would be similar to the cost of mining one ounce of gold or approximately three hundred and fifty dollars. The issue is that silver is trading around thirteen dollars an ounce and 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.
Historically, the silver to gold ratio has been fifteen to one. It would typically take fifteen ounces of silver to buy one ounce of gold. Today, with silver trading at approximately thirteen dollars an ounce and gold at around Nine hundred Fifty dollars an ounce, it takes closer to Seventy Five ounces of silver to buy one ounce of gold. This suggests an obvious opportunity as once this ratio is corrected, we can expect silver approaching a price of at least forty dollars an ounce. Most analysts are suggesting a price between sixty dollars and one hundred and twenty dollars an ounce. Although this analyst tends to remain conservative in his predictions, it’s not at all unrealistic to expect such profits when you consider the cost we now must face in order to mine silver as a primary metal.
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. The only question that remains is how much money you will sell it to them for! These coins are becoming harder and harder to acquire in any quantities and based upon the worsening silver shortage they may eventually become impossible to acquire at all. Oh 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.
If you have lost money in the markets, if you are looking for precious metals to hedge against inflation, if you are looking for a great precious metal for bartering Silver is a fantastic buy. Bags of Silver Dollars are ranging from $18,000 to $19,500 as of today and if the experts are right Silver may go as high as $50 to $89 dollars an oz. That means a bag of silver could be worth between $50,000 to $89,000 per bag and that could help you make up some of what you have lost, and is certainly a great hedge against inflation, and would give you huge bartering power. Now I am not saying you should not buy gold as it is also important to own. I just feel everyone one should have some silver and if you can, I would suggest buying at least 2 bags. If that is out of your range then you should be buying rolls of silver dollars as you can.
Call my office, Colonial Resources and talk to my assistant, Terry Sachetti, a Sr. Analyst at 1-763-219-8895 and he will be more than happy to answer any questions you may have about Silver and Gold.
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