Silver, also known as poor man’s gold, has been used for more than 4000 years as a form of money and store of value.
Firstly you cannot ignore the gold/silver price ratio. This is one of the best indicators of how far silver prices can go. If you average out the price ratio between gold and silver throughout history, you land on a single magical proportion of 15 to 1. That implies that when gold is at $1600 per ounce, silver should be $106 per ounce. Gold is currently trading at $1640 an ounce and silver is at $30, which projects the ratio is now 54:1. Silver is massively undervalued right now and that gives it much more upside potential than gold.
What most people don’t know is that right now there is less above ground available silver than there is gold, that’s right, there is less silver than gold. This trend of consuming silver and saving in gold isn’t going to stop; the above ground supply of gold will continue to grow, while the above ground supply of silver will continue to move us towards a critical physical silver shortage.
Silver without doubt is the most important metal in the world. Yet when most people think about the uses for silver they think of jewellery, silverware, and photography. However, this barely scratches the surface of the uses for silver. Silver is used in solar panels, mobile phones, water storage, food processing, batteries, electronics, and for other industrial uses.
The International Organization for Standardization (ISO) publishes a list of standard currency codes. On that list silver is classified as a CURRENCY and has a currency code of XAG.
In 1995, the price of silver was at an average of $5. In 2011, it had an average price of $40. That is a massive change of 700%.
Precious metals investors often ask, “Should I invest in silver bullion or gold bullion?” Most silver experts would suggest silver. There are many reasons for their inclination towards silver. Let’s look at some of them.
First, silverhas always produced a greater percentage growth during precious metals bull markets. In some precious metals bull markets, silver has tripled in value while gold has doubled. In some moves,silverrose four times while gold doubled in price. Additionally,silverhas more industrial applications than gold does, with more uses being developed.
An increased industrial use provides more value to silver. According to CPM Group, a New York metals consultancy, between 1990 and 2003 new production and secondary recovery fell 1,899.9 million ounces short of meeting industrial demand.
Not only have production and secondary recovery been unsuccessful in meeting demand each year of the last fifteen years, but above ground supplies are critically short. Certain analysts say that supply will fall far short of meeting demand over the next decade, and that much higher silverprices will be the result. According to accepted statistics, more gold rests in the vaults of the world’s central banks than there is above ground silver.
The drop in reported silver holdings around the world shows just how much the production deficit has eaten into above ground supplies. In 1995, COMEX stocks stood at 260 million ounces; today COMEX stocks are struggling to stay above 100 million ounces. In 1991, estimated silver inventories in London and Zurich were 350 million ounces; today that number is closer to 50 million ounces. In 1980, world governmental silver stockpiles totaled some 325 million ounces; today, few governments hold any silver.
Finally, many people think first of gold when the subject of “hard money” arises. Yet, more people have used silver for money than have used gold. In something like fourteen languages, the words for silver and money are the same.