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“Why Invest in Silver?” The Massive Above Ground Silver Shortage

At the dawn of the technology revolution in the 1970’s and 1980’s, there was a massive increase in the industrial demand for silver.  Today, total demand for silver is between 800 million and 1 Billion ounces per year and nearly 700 million of that is funneled exclusively to meet industrial needs.

Government Silver Manipulation

Unfortunately, between 1980 and 2006 there was a massive government sell of silver.  The United States alone nearly sold 3.5 Billion ounces and multiple other governments sold off nearly all their stockpiles.  In addition to this, investors net sold 1.7 Billion ounces during that same period.  Effectively meaning that between 1980 and 2006, somewhere between 5.5 and 10 Billion ounces of silver were dumped on the market.  This effectively kept the silver price flat for decades until the sell off ceased.

The Problem with Silver Mining

Because of the low silver prices, new mining ventures in silver were nearly non-existent.  Consequentially, while the demand for silver rose, the price of silver did not and neither did the mining capacity.  As a result, for at least the last 15-20 years, we have been running a 50-200 million ounce deficit every year on silver production, which has decreased the supply steadily year after year after year.  Even now as the price of silver has increased, creating additional silver mines will not be an easy project.  It takes approximately 7-10 years to take a mine from the point of discovery to production.  Another problem is that a majority of silver mined does not actually come from silver mines.  Back in 2007, approximately 75% of all silver mined came from copper, zinc, or gold mines.  One of these mine would find a large silver deposit and would process it separately from their main metal, but they were not actively seeking to find silver.  Only 25% of the supply mined actually came from silver mines.

 

Above Ground Silver Rarer Than Gold

         In the end, the major deficit that has been run for many years has resulted in above ground silver being more rare than gold!  There are three ounces of gold for every one ounce of above ground silver.  In fact, the supply of above ground silver is so scarce that if silver mining were to stop today, the above ground supply would only last for four months before being completely exhausted.

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