All That Glitters Is Not Just Gold
Gold and silver have both been a store of wealth for many a century. Because of their scarcity they have been classed as “Precious Metals” and both have been used throughout history as a form of currency. Judas sold out Jesus for 30 pieces of silver which back then was a small fortune but today wouldn’t get you a month’s rent in a bachelor apartment on the worst side of town.
Historically silver has traded at a ratio of 16 to 1 to gold. Today that ratio is at around 55 to 1. Since the beginning of mining these metals 4 billion ounces of gold and 40 billion ounces of silver have been taken from the ground. This ratio is 10 to 1. Today there is 3 billion ounces of gold still above ground and only about 400 million ounces of silver. This ratio is 7.5 ounces of gold to 1 ounce of silver!!
All of the silver that was accumulated throughout history has disappeared through the industrial age. An organization that was formed in 1947 called “The Silver User’s Association” (SUA) was and is headed by companies such as Eastman Kodak, Tiffany’s, Dow Chemical, DuPont, Bank Of America and the list goes on. Their members process 80% of all the silver used in the United States. Their main objective in forming was to keep the silver price as low as possible and to convince the U.S. government to unload their 6 billion ounce inventory at rock bottom prices. Between the SUA and the central bankers all the above ground silver has almost been depleted. Not only has the price of silver been brought to historic lows but something else has also happened, that being that silver has become next to worthless within human consciousness. Silver is passed over as a bad investment and beautiful handmade sterling silver items can be purchased for less then the material they are made from.
Today with silver being approximately 7.5 times more rare then gold lets take the price of gold today and multiply it at that ratio. We end up with $4,350 an ounce for silver. This all sounds ridiculous when we look at $11 an ounce silver today. But as we continue to use silver and it becomes so rare that there is not enough to go around we should one day see the silver price start to reflect its true value.
The worst thing that could happen to the SUA and central banks was for it to become once again a store of value. Investors have stayed away from silver for a long time giving it the nickname “The Old Gray Dog”. But with hardly any silver left in existence we are presently looking at a very small tight market. One rich enough investor could buy all the existing silver in the world many times over. Warren Buffet bought 130 million ounces in 1997. If a lot of investment money began to move into this sector, two things would happen: an even bigger and faster depletion of inventories and most importantly a price that would begin to reflect its true value.
The greatest principle in economics is the law of supply and demand. Silver has broken free from that law and is out there somewhere in no man’s land. A day of reckoning is approaching in which silver shall regain its stature within society not just as a store of value but as “THE GREATEST MINERAL KNOWN TO MANKIND”.
