Why Buffett, Gates and Soros are silver Bugs?Thoughts from Ted Butler..............
by: pnzrvi 01/08/05 10:01 am
Msg: 489951 of 489964
In the last 60 years, even though we have taken many billions of ounces of silver from the ground, we have used even more for industrial consumption. We’ve also had to use almost all of the 10 billion ounces that existed 60 years ago. Today one billion ounces of silver remain in the world, even though most analysts suggest much less, and no one can document more than 150 million ounces in bullion inventories. That’s one billion ounces of silver left above ground. Sixty years ago we had silver inventories that were 50 times larger than what was produced from mining. Now we have inventories less than two times annual production. That’s a shocking drop of 96%.
During that same 60 years, we took out of the ground over three billion ounces of gold. Since gold is such a revered and valuable commodity, very little was consumed industrially. Almost all of it was converted into jewelry and investment bars and coins. These are forms in which gold can be easily recovered. Therefore, this three billion ounces of new gold over the past 60 years, when added to the one billion gold ounces existing back then, gives us a current day world inventory of four billion ounces. Sixty years ago we had 50 times more gold in inventory than we produced and today we still have 50 times more gold in inventory than the annual mining production.
That’s one billion ounces of silver versus four billion ounces of gold. Today’s silver inventory is valued at $7 billion, while the gold inventory comes to $2 trillion. This means that all the gold in the world is priced 250 times more than all the silver. Stated differently, the value of the silver inventory is currently priced at a fraction of one percent of what the gold inventory is priced at. Now, I ask you, when in your life have you ever run across a situation where something much rarer than another item has sold for a tiny fraction of the price of the more plentiful item?
I’m not saying anything negative about gold. It is just a clear case of silver being a better prospective investment. It’s not a question of gold being overvalued; it’s a case of silver being undervalued. As I’ve written before, a climb in the price of gold will not, and cannot, hurt silver. I welcome it. I am convinced that, once you learn there is less above-ground silver in the world than gold, you will know more than 99.9% of all the investors in the world. This simple fact is not known, but it’s all you really need to know to confirm just what an incredible opportunity is being presented to you.
I encourage those investors who are exclusively invested in gold to consider diversifying some of their gold holdings into silver. It is my firm belief that the gold-only investors are the most logical potential buyers of silver. People buy gold because it is a true asset diversification, it’s no one else’s liability, it has endured through the ages, and it’s rare. But silver is all of those things, and it’s even rarer than gold. Just about everything you can say about gold also applies to silver.
While the knowledge that silver is rarer than gold should be sufficient, to make gold investors rush to own silver there is even greater justification. Not only is there much less above ground silver relative to gold, we know this inventory mismatch is growing more extreme daily. That’s because silver is still in an industrial consumption deficit. On the other hand, the inventories of gold grow daily, as they have everyday for the past 5000 years. Over the next 10 or 20 years, as long as the structural deficit continues in silver, as it has for the past 60 years, it’s a certainty that we will run out of above ground silver. It’s just a matter of time.