More Physical Silver Available for Investment than Gold

December 28, 2012 | By | Reply More

Here’s one statistic that hit us by surprise. The amount of physical silver available for investment is approximately three times as much as for physical gold. We will get to the reasoning behind these figures later, but think on this.

Today one ounce of gold will buy more or less fifty four ounces of silver, a silver/gold ratio of better than 50:1. In the days when the metals were used as currency the silver/gold ratio was in the order of 16:1 simply based on the amount of each metal dug out of the ground each year.

Based on this one piece of vital information alone encourages us to believe that silver’s investment prospects for 2013 and beyond cannot be anything but excellent.

Nowadays a new factor has to be included in the annual availability of both metals and that is recycling. On average 750 million ounces of silver is mined annually with approximately a further additional 250 million ounces recycled each year to total 1 billion of physical metal available to the market. Owing to the increasing use of silver in industrial and medical applications much of this availability is lost to the investment market. Present estimates are in the region of 350 million ounces of silver will reach the market in the form of bullion bars, coins and jewelry, the balance of 650 million ounces will go to industry.

Of the annual gold production of around 80 million ounces together with an estimated 50 million ounces of recycled metal totalling approximately 130 million ounces less around 10 million ounces going for industrial purposes leaving a physical silver/gold ratio of less than 3:1. To state the obvious this scenario tells us that it would need less than three ounces of silver to buy one ounce of gold based solely on annual supply.

Supply & Demand -the Great Leveller

Right now 54 ounces of silver will buy one ounce of gold. Is it likely that gold will drop by a factor of 18 times to accommodate the current supply situation? Not even remotely likely, but look at the scope that silver has in just to get back to the historical level of 16:1. It would have to trade at over $100 an oz. While at today’s ratio it would be fetching $300 + an oz.

Indian Silver Sales

Finally we are told that silver is rapidly gaining favor in India even to the extent of eventually out selling gold in the worlds largest gold importing nation. If so it would require more than the entire annual world silver production mined and recycled of 1 billion ounces to purchase the equivalent in gold. We will excuse the probability of journalistic licence and hyperbole in our reading matter but “where there is smoke there is fire”.

Bet on Silver

Silver prospects for 2013 and beyond could shape up to have an explosive future for the metal in the event that the long term gold bull market trend stays in play as expected.

 


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