A large percentage of the silver that’s mined is “Economically Lost” forever. Investors are sitting on an investment that few understand…
Silver will likely turn out to be one heck of a better investment than gold due to the rarity of the metal and lack of available supply in the future. While gold has stolen the show recently, I’ll bet my bottom Silver Dollar that silver will outperform gold during the next financial-currency crisis.
But, before I provide my analysis, I wanted to make a few comments about the analysts who say that “SILVER ISN’T A REAL INVESTMENT” like gold. I follow many websites and newsletters, and there seems to be this notion that silver is just an industrial metal, and its lousy price performance so far this year, versus gold, proves it isn’t worth of investing.
Yes, it’s true that silver has underperformed gold and may likely experience a paper price selloff once the broader stock markets begin to crash once again. However, at that time, I imagine acquiring silver retail bullion products will be even more difficult than it was during March-April.
Regardless, the reason I believe silver will be one of the few KEY INVESTMENTS to own going forward has to do with the dire energy predicament we face… which I label as the ENERGY CLIFF. Unfortunately, most analysts that look at silver as more of an industrial metal do not understand the Falling EROI – Energy Returned On Investment and how it’s impacting the global economy and financial system.
So, they continue to criticize the “Silver Pumpers” or “Silver Hypers” as mere charlatans. I find this simply hilarious when the Federal Reserve just purchased $3 trillion worth of assets in just the past three months. Furthermore, total U.S. public debt increased $25 billion per day in 2020, more than five times the average daily rate over the past decade.
While all this fancy FED FINANCIAL WIZARD OF OZ propping hasn’t destroyed the U.S. Dollar or the faith in the U.S. Treasury Market, it will in time. Just be patient. At that point, those few who own physical precious metals, especially silver, will be glad that they understood that you couldn’t erase 2,000+ years of SILVER MONETARY HISTORY.
THAT’S CORRECT… Over The Past Decade, 5 Billion Ounces Of Silver Mine Supply Likely Lost Forever
The irony of being an ANTI-SILVER analyst will actually be the reason to invest in silver. Again, most analysts look at silver as more an industrial metal. They say the real monetary metal is gold, not silver. However, what seems to be seriously overlooked by these analysts is that silver is still by far the most acquired investment metal, IN TROY OUNCES. From 2010 to 2019, total global physical silver investment demand was 2.3 billion oz versus 345 million oz for gold. Sure, the Dollar amount of investment gold was much higher, but ounce for ounce, silver is the largest physical metal investment market in the world.
With that being said, silver investors should be happy to know that 5 billion ounces of world mine supply over the past decade is likely lost forever. The term I use for this lost silver supply is “ECONOMICALLY LOST” metal.
Some precious metals analysts, such as Jan Nieuwenhuijs of Voima Gold, stated that there was a lot more above-ground silver in the world than what the Silver Institute discloses as “Identifiable above-ground stocks.” Jan argues that there are 1.6 million tons or 51 billion oz of above-ground stocks in the world, 20 times higher than the quoted 2.5 billion oz of physical investment silver stocks by GFMS in the 2019 World Silver Survey.
What Jan seems to ignore conveniently is that a large percentage of that silver is “Economically Lost” forever. How realistic is it to include most of the silver used for industrial purposes that are still in old homes, appliances, electronics, or in landfills across the world?? We can’t include this “Economically Lost” silver as above-ground inventories in some silly “Stock to Flow” calculation. It’s pure RUBBISH.
If we look at the silver market over the past decade, my calculations suggest that at least 5 billion oz of silver mine supply were Economically lost. I derived this figure by determining how much silver was recycled in each category annually and then estimated the total amount lost. First, I started with the total silver mine supply from 2010 to 2019 and then subtracted the estimated Economically Lost amount:
Approximately 60% or 5 billion oz of the total 8.35 billion oz of silver mine supply from 2010-2019 was economically lost. Now, compare that to the estimated 123 million ounces or only 12% of the gold mine supply lost over the past decade. Thus, 88+% of the 1+ billion oz of gold mined over the same period can still be counted as Above-Ground stocks. Most of the gold that was economically lost 2010-2019 was in the technology sector. According to the World Gold Council, over those ten years, gold consumption in the technology sector was 116 million oz. While some of this high-tech gold is recycled, 90% of global gold recycling comes from scrap gold jewelry (Source: World Gold Council).
Unfortunately, most people who buy silver jewelry end up throwing it away rather than selling it for scrap recycling. It’s just not worth the effort and time to drive to the pawnshop to sell $10-$25 worth of silver jewelry. Thus, the majority of silver jewelry that was fabricated over the past 50 years is likely never to be recycled. Sure, if the silver price goes up to $100, we may see more silver jewelry recycling, but I doubt we will see billions of ounces come back in the market.
For example, over the past decade, of the 1.86 billion ounces of total world silver recycling, jewelry scrap supply only accounted for 12% of that total. Thus, of the total 1.87 billion oz of silver jewelry demand 2010-2019, I determined that at a conservative 15%, only 281 million oz may be recycled. No, it’s not a typo. Total silver recycling from that ten-year period was 1.86 billion oz versus 1.87 billion oz of silver jewelry demand. Source for both silver recycling and mine supply comes from the Silver Institute’s World Silver Surveys.
Now, if we add the total world silver mine supply from 2010 to 2019, it equals 8.35 billion oz:
Here is why silver will be a much better-performing investment asset in the future than gold.
Silver vs. Gold: Mine Supply & Recycling (2010-2019)
- Global Silver Mine Supply = 8.35 billion oz
- Global Silver Recycling = 1.86 billion oz
- Silver Recycling-Mine Supply Ratio = 22%
- Global Gold Mine Supply = 1.03 billion oz
- Global Gold Recycling = 424 million oz
- Gold Recycling-Mine Supply Ratio = 42%
Because only 8% of world gold demand is in the technology sector (2010-2019) versus approximately 50% for silver industrial consumption, most silver mined is economically lost forever. During the ten-year period, 4.8 billion oz of silver was consumed in the industrial sector. On average, only 20% of the annual industrial silver demand is recycled. Thus, less than 1 billion oz of that total 4.8 billion consumed in the industrial sector will likely be recovered.
Thus, adding up the possible recycling from that 8.35 billion of silver mine supply in the Industrial, Jewelry and Silverware sectors, and adding it to the physical silver investment demand (assumed at 100% recycled), I arrived at approximately 3.3 billion oz of silver NOT ECONOMICALLY LOST. By subtracting the two, I came up with the 5 billion oz of Economically Lost silver supply.
Again, this is just a simple calculation. Now, some might say, “If silver price shoots back up to $50, wouldn’t that bring on a lot more silver scrap recycling?” It may. However, in 2011 when the silver price reached $50, the total amount recycled was 230 million oz. Even if we say 250 million oz per year over a decade, that would only be 2.5 billion oz of recycling. That is still far below the 8.35 billion oz of total global silver mine supply over that period.
Silver investors are sitting on an excellent investment that few understand the powerful fundamental dynamics. I say, let the Federal Reserve and U.S. Government continue to print trillions to prop up the markets. The more money they print and the more debt is added to the system, the better the fundamentals to own precious metals, especially silver.
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