How much silver is there?

Most of you know my bullish bias on silver. I have written numerous articles outlining this incredibly misunderstood, unloved and undervalued investment opportunity.

http://www.bullionmark.com/2008/11/amazing-silver.html
http://www.bullionmark.com/2008/10/silver-to-gold-ratio.html
http://www.bullionmark.com/2008/09/important-considerations-for-silver.html
http://www.bullionmark.com/2008/09/myths-in-silver-market.html

Much of my research is based on gold and silver comparisons throughout history. I want to make it very clear that I am also bullish on gold but relatively speaking the silver story and data is compelling.

My latest research involved looking at the amount of ounces in existence (all the metal ever mined plus recycle minus consumption) back to 1900 and developing a series of metrics based on price and population.

The first chart shows that 1 billion ounces of gold existed in 1900 versus 5 billion ounces today in 2008. This makes sense. Gold is valuable, therefore hoarded and its industrial uses are largely reclaimed through recycling. Roughly new mine supply adds to the ounces in existence.
However 12 billion ounces of silver existed in 1900 but only 1 billion remain in 2008. Yes thats right less than 1 billion ounces and there is 5 times more gold available than silver! Why is this so? Well silver has far more industrial uses than gold. It is critical to electronics, whitegoods, medical technology, solar technology, industrial equipment, water purification, photography, nano technology, military weapons etc etc. Silver is critical in our daily lives. However the low price of silver makes recycling uneconomic, so silver used is silver consumed and lost forever. Secondly, silver is mined as a bi product of other metals such as zinc, lead, copper and gold. Silver is scarce in the earth and very expensive to mine. World silver mine supply could decline substantially in the next 2 years as economic conditions worsen around the globe. Silver mines themselves are going bust (ie Macmin silver in Australia) but also the base metal miners who mine some silver as a bi product have now become uneconomic and closing at an accelerated pace. Peak silver is with us!


Overlaying the population of 1.6 billion we see the world per capita gold at 0.6 ounces in 1900. In 2008 this has increased slightly to 0.7 ounces despite the population increasing to from 6.75 billion. So gold has been added to world supply slightly faster than population growth. Silver on the other hand has declined from 7.5 ounces per capita in 1900 to just over 0.1 ounces per person on the planet. See chart below.




If we then bring price into the mix the story becomes even more compelling. If we take the 1900 gold price of $20 and silver price of $0.65 and multiply by the ounces at the same period we get a value or market cap for gold and silver. By dividing silver into gold we can see relative market caps in a ratio. In 1900 this ratio was 2.6. for every dollar of silver in the world there was $2.6 dollars of gold. Astoundingly in 2008 there is $400 in gold in the world for ever dollar of silver. Silver is scarce and dramatically under valued versus gold.



The final chart highlights the much publicised gold to silver ratio. Simply the price of silver divided into the price of gold. Given the 700 year average is 15 the currently level of 80 appears extreme.



I wish to stress that I am very bullish on gold. I expect to see gold prices of between $3000 - $6500 in the next 5 - 10 years. However I am ultra bullish on silver. If the history, data, fundamentals, technicals, pricing and even market structure can overwhelm the political forces holding silver down, prices could reach unimaginable levels almost overnight.