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Gneisenau
5th April 2010, 12:19 AM
The real silver deficit

This classic by David Zurbuchen deserves its own thread.

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“Silver is rarer than gold. Period. There is less silver in the world, above ground than there is gold. That is easy to document. Since I have been harping on this point, no one has been able to refute it.”

“Even though there are five ounces of gold in the world now for every one ounce of silver, this 5 to 1 ratio will expand as newly mined gold is added to above ground supplies… This should get your juices flowing. It should drive you to buy silver… Silver is more rare than gold, and rarer still is someone who knows this fact. You should act accordingly.”

-Ted Butler

I began my last essay, “The Silver Deficit”, quoting Mr. Butler in a positive light. I sought to prove him right, and I believe I did concerning the 60+ year structural supply/demand deficit. But I must now ask, where has Ted Butler so easily documented his claim that silver is more rare than gold? I don’t recall ever reading his proof text.*

*If one does happen to exist, I would appreciate someone sending it to me.

As far as I know, Ted Butler may be misinformed in his above pronouncements. It was comments like those above that mislead me into writing my first ever Gold-Eagle essay entitled, “Silver: A Rare Opportunity,” an essay which emphasized the very ‘facts’ that I’m now attempting to refute.

I believe this is an important issue to come to terms with. If our investment decisions are founded upon misinformation, then we are prone to failure. That being said, I do truly enjoy Ted’s writings. After all, he was one of the few writers who really piqued my interest in silver over the years. But nevertheless, I think it’s incumbent upon all of us to research the facts rather than accept statements with blind faith. In that light, I want to share my own research into these facts.

So here are my opposing claims:

1. Silver is not rarer than Gold.

2. The gold to silver rarity ratio is about 1 to 5, not 5 to 1.

3. Finally, there is nothing factual about the statement that silver is rarer than gold, UNLESS you qualify it with the condition that you are only referring to market accessible silver in the form of bullion. But this is an unfair comparison, because you are including all gold in jewelry form while excluding all silver in jewelry, sterlingware, and privately held bullion/coin forms. Granted, the market price of silver will need to rise a greater percentage than the market price of gold before either its jewelry, silverware, or privately hoarded coin forms become available to the market in large quantities, but the fact still remains that this form of silver is available at some price*.

*We will deal more with this ‘price’ in an upcoming essay. For now, one would be advised to read “Hidden Silver About to Surface?” However, please note that I think Gene Arensberg’s estimate of how much silver is held in private hoards, if only dealing with silver in coin and bullion form, is too high.

http://www.financialsense.com/fsu/editorials/2006/0526.html

Gaillo
5th April 2010, 12:34 AM
Thank you for the article!

I'm more of a 5:1 S/G guy... when it comes to below-ground reserves. However, if you count above ground holdable (bullion, etc.) in the ratio, I think it's probably more like 1:1 from what I've researched.

I would not be AT ALL surprised if the ration closes to 10:1 G/S when the cap comes off the manipulation... and I wouldn't be all THAT surprised if it closes to 2:1 shortly afterward. Parity is not out of the question... once the real situation starts to sink in to people's consciousness!

Saul Mine
5th April 2010, 02:17 AM
A lot of people lie about how much gold and silver they have, and a lot of people won't say anything at all. So right from the start we are talking a bout a ratio of lies and guesses. This report (http://www.gold-eagle.com/editorials_05/watson080206.html) tries to be a little more useful in presenting the unknown parts.

What we can be fairly sure of is that production and demand are still close to the natural ratio, between 12:1 and 17:1, and G/S has a ways to go to get to that range. But remember, markets rarely do anything just because you think they should, and silver is even more so.

PDT
5th April 2010, 07:02 AM
Silver is consumed, gold is almost never consumed.