Silver Inventories At Low Levels

Newer readers also need to understand the fundamental differences between the gold and silver markets; what was described in a previous commentary as a matter of “stocks and flows”. While gold has been conserved over the past decades (and centuries), silver has been consumed.

Artificially priced far below its real value decade after decade; industrial demand for silver (the world’s most-versatile metal) has soared. Used primarily in small amounts; most of the silver mined over a span of more than 4,000 years is now strewn across (primarily) Western landfills. This silver cannot ever be economically recovered unless the price of silver should soar to some fantastic multiple of current prices – and thus has effectively been “consumed”.

While priced at a current ratio of 60:1 versus gold; the Earth’s crust contains only about seventeen times as much silver as gold. This is why (for more than 4,000 years) the legitimate price ratio between gold and silver hovered around 15:1.

Yet with global inventories/stockpiles of silver already at all-time lows (in per capita terms); we see the flows of (real) silver being sucked out of those dwindling inventories occurring at an even more unsustainable rate than in the gold market.

Investor demand (as reflected in the sales of U.S. gold and silver minted coins) almost precisely mirrors the 60:1 price ratio. Total “fabrication demand” for gold and silver (industrial demand/jewelry demand) is presently at ‘only’ about a 10:1 ratio (based on data from the WGC and Silver Institute); but with silver inventories/stockpiles already decimated, even that modest ratio is unsustainable.

The year 2014 should be “the year of silver”, in terms of fundamentals dictating a correction in prices which dwarfs the modest tripling which took place in 2009. However, if 2014 is not the year of silver; we should feel quite confident in predicting that 2015 will be the Year of Silver Default.

This article is brought to you courtesy of Jeff Nielson From Bullion Bulls Canada.

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