Subscribe for 12 months with recurring billing - $199

Buy 12 months of subscription time - $199

 

Search Silver Prices
Silver Price
[Most Recent Quotes from www.kitco.com] Our RSS Feed

Silver Updates by Mail

Enter your email address:

Follow Us on Twitter
« Silver Shorts Feel the Squeeze | Main | Silver Wheaton Corporation Call Options Up 212% »
Wednesday
Nov032010

More on the Case of Silver

More on the Case of Silver 04 Nov 2010.JPG



By David Galland, Managing Director, Casey Research

Last month gold broke into new record territory – reaching an all-time high of $1,387 on October 14.

A new record in nominal terms, that is. To top the previous high in inflation-adjusted dollars, gold will have to approximately double from there.

Silver, however, has barely made it halfway back to its prior nominal high of $49.45 an ounce, achieved on January 21, 1980. In order to break into new territory in inflation-adjusted dollars (using the same CPI calculation methodology used in 1980), silver would have to rise to over $250 an ounce – more than ten times where it is today.

Here are some other useful facts about silver:

Due to the fact that silver’s industrial applications result in destroying the stuff, there is currently a total of only 1,234,590,000 “investable” ounces of silver in aboveground supplies. At $21 per ounce, the total value of aboveground silver comes to only about $26 billion.

By contrast, because pretty much every ounce of gold ever mined still exists, there are a total of 4,585,620,000 “investable” ounces of gold in aboveground stocks. At $1,330 per ounce, that comes to $6 trillion worth.

Thus, the silver/gold ratio is currently about 63:1, yet the total value of all the investable gold on the planet is about 235 times that of silver.

For the record, the ratio of silver to gold in the earth’s crust is 17:1. That’s in the ballpark of the 15:1 average silver/gold price ratio that has held sway over the centuries.

Kicking off his presentation at our recent Gold & Resource Summit, Bob Quartermain, the powerhouse behind Silver Standard (SSO), stated that if the audience took nothing else away from his talk, it should be that the demand for silver well exceeds new mine supply, and has for some time.

For instance, in 2009 total silver demand topped 889 million ounces, outstripping new mine supplies of 710 million ounces. The difference was made up by scrap recycling.

Of course, the real pressure going forward is from investment demand, which has been a fraction of that for gold. If history is any guide, however, as gold becomes viewed as being too expensive for the "common man," silver sales will soar.

The following chart from Quartermain’s presentation helps put things into perspective.


Furthermore, if you agree with our contention that the economic crisis will continue, and that China’s propped-up manufacturing sector will come under serious pressure, it’s also logical to assume that demand for industrial metals such as lead, zinc, and copper will fall. That’s important in the discussion of silver, because only 30% of silver’s production comes from primary producers (i.e., silver mines), with the balance produced only as a byproduct of other minerals.

Of the total new mine supply, fully 57% is associated with base metals production.

As it, too, has industrial applications, demand for silver from manufacturers will also falter, but given the existing deficit in supplies, the surge in investor demand, and silver’s growing use as a “green” metal (50 to 60 million ounces used up in solar energy applications in 2010 alone) and as an antibacterial agent, the overall supply/demand picture remains favorable.

The truly miniscule amount of silver available above ground and its relatively modest price gains over the course of the precious metals bull market so far are what set the stage for it to play a quick game of catch-up to gold in the months just ahead.

And when silver does a runner, the handful of pure play silver companies – producers and juniors that have identified large deposits – will do the equivalent of a moon shot.


Just a heads up on something to pay attention to, especially on days when the precious metals take a breather from their steady ascent.
----
[In times of crisis like these, it’s only prudent to protect your assets by buying silver, gold, and related investments. Large-cap mining stocks have proven to keep – and even increase – their value even during the Great Depression, when most other stocks plummeted. Try BIG GOLD, the go-to advisory for sound precious metals investments, risk-free today. Details here.]


We hope that you enjoyed our little venture into the options market via Silver Wheaton which we concluded this week and many thanks for the emails that we have received on the subject and yes we will try and improve our grammer, but the priority is still to focus on 'Return on Capital' thats all that matters in our very humble opinion.

Our premium options trading service, SK OptionTrader, has opened and closed 12 trades in the last 6 weeks, banking an average profit of 70% on these trades.

This brings our total of closed trades to 38, with 36 winners. This means that a subscriber who had invested $1000 in each of our 38 trades would have banked profits of $15,636.00. We have just posted a set of charts demonstrating the importance of timing in any trade on gold-prices, please click here if you are interested.


SK Chart 23 Oct 2010.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today?


Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>