1. The historic silver/gold price ratio was 16:1, but in recent years, silver is relatively cheaper ranging from about 40:1 to 80:1. On October 12, 2009, with silver at $17.75/oz. and gold at $1,057/oz., the ratio is 60:1. This means that silver is currently undervalued, and cheaper than historic norms, and thus it is a better investment than even gold if you want to “buy low and sell high”.
2. The supply and demand fundamentals for silver are extraordinary. There has been an ongoing supply/demand deficit in silver for 12 years. More silver is consumed by industry than is produced by mining and recycling combined. Some say this deficit reaches back 60 years, and has consumed virtually all the known silver ever mined since the beginning of the world. The annual deficit has recently ranged from 100 million to 200 million ounces per year. Annual supply is about 650 million ounces, and annual demand is about 800 million ounces.
3. Considering refined and mined known silver reserves, there is far less silver in the world than gold. Approximately 150 million ounces of silver vs. 4 billion ounces of gold.
4. Most silver, 70-80% brought to market, is mined as a by-product of copper mining, gold mining, or zinc and lead mining. There are very few primary silver mines in the world, since most are really copper or gold mines. Therefore, mild increases in the price of silver will not bring substantially more silver out of the ground. Much silver is consumed in photography; electronics, medicine and numerous other industries. There is so little silver used in any one application (cell phone, photograph, electric terminal), that price increases in silver will probably not reduce demand. With a relatively inelastic supply, and relatively inelastic demand, it will require a dramatic explosion in price to bring the supply and demand deficit back into balance.
5. Famous investors have bought silver in recent years. In 1997, Warren Buffet bought 130 million ounces of real silver, due to the favorable “supply and demand fundamentals”, he bought as much as they would let him legally buy, yet his purchase was with about 2% of the value of his portfolio. George Soros owns a large percentage of Apex Silver (SIL). Bill Gates owns a substantial position in Pan American Silver (PAAS).
6. In the gold market, there has been a large increase in paper futures contracts which are used to suppress the price. In silver, the relative amount of paper contracts is much larger. In other words, there are more paper shorts that will be caught in an impossible situation when the price of silver really begins to rise due to the fundamental supply demand gap. They will be forced to buy silver or go bankrupt. Either action will cause a dramatic rise in the silver price. If they default on the silver contracts, that will signal to the world the severe shortage of silver, and signal a great investment opportunity.
7. One of the cheapest ways to buy silver: You can buy U.S. coins dated 1964 or earlier, $1000 face value (4,000 quarters, or 2,000 half dollars, or 10,000 dimes), in a “bag” of “junk silver”, which contain 715-720 ounces of silver, depending on how worn the coins are. In the early 1980’s, when silver was $30-$50/oz., a bag of silver could be used to buy a house! We could see that day again – soon!
8. But historically, a silver dime was a day’s wage, whether 100 years ago, or in Roman times when a denarius was a day’s wage. This means that a dime of silver, worth $1.27 today, could be worth over $150 (which is a day’s wage in today’s money.) or more, now that silver is scarce. Actually, in 1926, a silver dime could pay the rent at a 5 star hotel for a month! That’s worth about $6000 to $10,000!
You get so much silver for your money. A bag of junk silver weighs about 55 pounds, and is the size of a bowling ball. If you invested $100,000 into junk silver coins, at $12,450/bag, that would give you 8 bags each weighing 55 pounds, or about 440 pounds total. Could you imagine moving that much around your house if you had to move? Silver is so cheap it creates physical problems for investors today!
You will sometimes find quarters in a bag dating back to the late 1800’s. In the early 1900’s, you could work ALL DAY for a wage of ONE SILVER QUARTER. Imagine being able to buy a day’s wage of real money for less than a dollar of today’s money! Today, in 2009, a day’s wage is over $100. Another way to put it is that the dollar has lost over 99% of its purchasing power over time. Yet, due to silver being undervalued, you can get 100 times the value of your money and labor if you invest in silver. Imagine if they paid a day’s wage today of $100 in silver quarters; they would have to give you about 100 silver quarters today. The implications are that if silver returns to its historic valuations, silver will need to go up in value about 100 times, to $450/oz. Silver is truly a bargain.
If you want to learn more about silver, read the works of the following people who have also written up good reports on the silver market:
David Morgan at http://www.silver-investor.com
Ted Butler at http://www.butlerresearch.com
Jim Puplava at http://www.financialsense.com/stormwatch/oldupdates/2003/0702.htm
T. Stein and S. McIntyre at http://www.safehaven.com/article-2115.htm
Douglas Kanarowski at http://www.gold-eagle.com/research/kanarowskindx.html
I have studied silver for 14 years. At the risk of sounding like a conspiracy theorist, the silver price has been manipulated and kept artificially low for years. The United States used to have the largest strategic stockpile in the world – in excess of 3 billion ounces. Today we hold essentially zero. Today, some reports put the amount of available silver on the COMEX at 60 million ounces. (The COMEX stands for the Commodity Exchange, which is a division of the NYMEX – New York Mercantile Exchange. This is where precious metals futures contracts are traded).
This presents an investment opportunity of a lifetime. Actually, it is more likely that silver today is the greatest investment opportunity in the history of the world.
- Never before in human history, has the entire world left using silver as money.
- Never before in human history, has the entire world consumed nearly all the silver for use in electronics.
- Never before in human history, has silver become so cheaply valued.
- Soon, never before in human history have we virtually run out of available above-ground silver.
Silver is a steal! It’s cheap – too cheap. Please call us to see if it is a good investment for you.
John Fisher
