It’s shiny, it’s fairly rare, and it has been the world’s de facto reserve currency anytime the S has hit the fan historically. Though it has been prized by civilizations since before recorded history, it’s no secret that there is really no meaningful use for the precious metal gold in comparison to the widespread use of many other metals. Once it is mined it is essentially fabricated into gold bars, coins, jewelry or, at times, sprinkled onto exquisitely expensive desserts in five star Manhattan restaurants. Gold, it seems, is another faith based unit of exchange. There is, of course, much more faith in gold’s ability to retain value than, say, a fiat paper currency printed out of thin air in the trillions, but in the end, there is no real purpose for it other than to store value based on the belief of others who either have it or want to acquire it.
Silver, on the other hand, is a completely different animal. As explained in the latest mini-documentary from Future Money Trends, silver has a long history of use in practical application. From health and medical related benefits to current uses in industrial application, silver is by far a more useful precious metal than its rarer counterpart.
Some interesting and critical things to understand about silver, and why it may very well become more valuable than gold in the near future are discussed in the video and summarized below:
- The majority of all silver mined is used for consumption, as opposed to use as an investment vehicle
- Since 1980, the above ground available gold stores are up 600%, while above ground available silver stores are down over 90%
- The historical silver-to-gold ratio is 15-to-1. The current silver-to-gold ratio is 50:1 meaning that it takes 50 ounces of silver to purchase one ounce of gold.
- Silver consumption continues to increase as the global population rises and more industrial applications are identified including, but not limited to, uses in medical applications, catalytic converters, solar cells, toll transponders, batteries, cell phones, computer chips, high tech weapons, and RFID chips.
- The silver production deficit will continue to rise. Total global production of silver in 2009 was 710 million ounces, while total demand was 889 million ounces, leaving a deficit of 179 million ounces.
- Since World War II, the US government has dumped over 5 billion ounces of silver into the open market. As of 2010, the US government reserve stores of silver are equal to zero.
For those who follow the silver markets, especially the specific production and consumption levels, it is becoming clear that, at current prices, there is simply not enough silver out there to meet the rising demands (both industrial and investment) from the global population. While we will stop short of predicting “peak silver,” the trend for this precious metals is clearly in the upward direction.
Based on just the supply/demand equations, the price of silver should continue to rise and approach its historical silver-to-gold ratio. Add to that the continued monetization of US debt and printing of US dollars to maintain the perception of an economic recovery, and the instability of global governments, and you can get a pretty good idea of what the long-term trend is going to be.
The 1980 high for silver was around $50 an ounce. We’re currently at about $30. In our view, silver is headed to at least $50 an ounce. Once reached, we believe, for a number of reasons, most of which are discussed in the above video, that silver is headed significantly higher.
As the “poor man’s gold” silver can be purchased in smaller denominations and it is likely to be much easier to transact with in the event of a catastrophic collapse of the US dollar or other currencies.
If you don’t have any silver yet, consider picking up some one ounce Silver Eagles, or “junk” silver denominations like pre-1970 half dollars and pre-1965 quarters.
Hat tip Daniel Visionvictory
Updated 12:45AM 12/31/10 – Please see comment below for gold’s various uses in industrial applications.