7 Reasons Why Silver Will Make You Rich!
I am very, very bullish on silver; the metal which is overlooked by most but will make the few who own it extremely rich. While gold will have a spectacular performance over the course of this bull market, it is silver that will be the MVP. Silver is about as close as you can get to a sure bet. Here are 7 reasons why silver will make you rich. Words: 2074
So says J. Edwards (goldstockmania.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted and edited […] below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Edwards goes on to say:
1) Gold to Silver ratio
Historically a gold to silver ratio has been maintained between gold and silver where a certain amount of silver could buy 1 oz of gold. In fact a long time ago, there used to be a U.S. law that fixed the gold silver ratio at 1:15, which then allowed 15 silver ounces to buy 1 ounce of gold. Since 1840, the gold to silver ratio has ranged from 1:15 to as high as 1:97. Today’s gold to silver ratio sits at about 1:46. Many analyst believe that this ratio is currently out of whack and will return to historical levels which according to Ted Butler and others has averaged 12-15 oz of silver to 1 oz of gold. If the ratio returns to historical levels it would require a substantial rise in the price of silver. At $1400 gold, silver would need to be around $90-$95/oz.
2) Inflation Past and Future
Just as gold is a great inflation hedge, so is silver. As you know silver has been known as the poor man’s gold. The dollar has lost over 98% of its value and this erosion of the dollar continues but at an accelerated pace not seen before in the history of this country making it imperative that you take the necessary precautions to protect the value of your savings now. I have not seen anything more compelling than silver to protect and dramatically increase my wealth at the same time.
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The Federal Reserve is working overtime printing dollars and inflating the money supply which means every new dollar they create is taking away value from every one of the dollars in your pocket! This is where gold & silver really shine since this type of monetary expansion has historically driven up the price of gold and silver. You can see just over the last year or two how the fed has really kicked it into overdrive. The inflationary effect of the spike you see on the graph below has not yet hit, so it is still time to get positioned for the inflation tsunami and load up on silver while you can and while it’s still cheap. There is no end in sight and they plan to print more dollars until their little printing press breaks. Wait till you see what they do to the dollar for an inflationary encore.
Chart of US Monetary Inflation
3) Increasing Silver Industrial & Investment Demand
In 2009 global silver demand hit 888 million ounces, while worldwide mining production totaled only 680 million ounces, thus creating a 208 million ounce deficit. Many people don’t know that silver is the most used commodity in industry next to oil. Industrial demand continues to pick up with new applications for silver coming to the market all the time, like silver zinc batteries. The silver zinc battery market alone is forecasted to be a large driver going forward for silver. If you are looking for more reasons, then how about Ten Thousand Reasons To Buy Silver, which goes into more detail about the numerous industrial applications that require silver. Yes, there are many of them from water filters and band-aids to electronics such as cell phones and RFID tags.
Silver investment demand is on the rise as well and perhaps may soon surpass that of industrial demand. Just like people are turning to gold in the great flight to quality, silver is also starting to attract demand from investors. One of the biggest wildcards in the mix is China. Until recently, the chinese government did not allow its citizens to buy precious metals. They have done a complete reversal and now encourage their 1.3 billion citizens to buy, buy, buy. India, that other country that has a 1 billion plus people in it, has a long history and tradition of buying both gold and silver. I believe silver demand in India will increase as the price of gold rises.
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Demand is also picking up in the United States, with the US Mint reporting record silver eagle coin sales… [which might well] consume the U.S.’s entire silver production for 2010. This is very significant because, whoever typically buys U.S. based silver will need to go and find it elsewhere since the U.S. Mint by law, is required to use only silver produced in the United States.
4) The Real Silver Advantages: Leverage & Availability
Since more people are waking up and running to gold for asset protection due to the erosion of the dollar and other fiat currencies, gold will naturally not be as affordable as silver. One could argue that we have already reached this point. People will come to reason that they can get the same level of protection as purchasing gold, but at a more affordable price by purchasing silver instead. The late comers to the party who missed out on the chance to buy gold when it was only $250/oz will want the next best thing which is silver. Likewise, many investors will also see that they can get a much higher leverage on purchasing silver. So if gold is starting to get too expensive for your wallet, then why not get some leverage by purchasing silver? The best times to buy is whenever the prices are falling. Since you get way more ounces of silver for your money than gold, you naturally get more leverage. Leverage coupled with a great investment, equals great profits! Just be clear, do NOT buy silver on margin! Short term volatility makes buying silver and gold on margin too dangerous.
No matter what you have heard or read, there is only one real way to buy silver & gold and that is physical. If you are not buying physical silver and/or gold, then more than likely you have a paper claim to someone else’s physical silver or gold. Either make a trip to a reputable local coin shop or buy gold and silver online at trusted bullion companies. You should really do both for geographic diversity. I also like the online storage options because it’s so easy to buy, sell, and securely store my precious metals.
Silver availability is like a game of musical chairs, when the music stops someone will be without a chair. The amount of above ground silver has been just about exhausted over the past century. I have seen estimates as high as 1 billion ounces of silver world-wide above the ground. Even in this worse case scenario and assuming that all this silver is for sale ( which most of it is not), all the silver in the world could be bought for just $18 billion dollars! This is a drop in the bucket when compared to much larger markets like gold, oil, US Bond Market, etc. So silver availability is a huge advantage for silver investors as there are trillions of dollars that are very likely to one day come chasing a very tiny silver market. I have seen silver stock pile estimates around 300 million ounces and lower. See more on this below.
5) Dwindling Silver Stock Piles
Going back in history, governments around the world used to have huge silver stock piles. In the 1950s, the US government alone had 3.5 billion ounces of silver, the largest stock pile in history. Since then according to the CPM group, just about all of these stock piles have been sold off/consumed. The CPM data shows that world silver stock piles have gone from over 2 billion ounces in 1990 to under 300 million ounces in 2007. Furthermore, silver demand has outpaced silver production by 156% annually for 19 consecutive years. According to Ted Butler more silver has been consumed than produced for over 60 years now. Available silver stockpiles have tanked to an estimated 140 million ounces or only a four-month supply of silver! No matter whose estimates you believe, the real point to get from all of this is that the quantity of silver has been disappearing at an alarming rate while demand is substantially increasing. Conditions are ripe for a shortage. Now contrast this to gold, which after mining for the past 5,000 years, we still have about 90% of all that gold still here with us. All the silver mined over the same period is now mostly gone!
6) Eventual Comex Short Squeeze
There are a handful of bullion banks that hold excessive short positions in both gold and silver. However, the short positions held for silver are much larger, in fact, the largest for any commodity. At varying points, there have been a silver short position 80 times greater than gold short positions. These bullion banks according to Ted Butler and Gata.org are primarily led by JP Morgan and HSBC. Although it is hard to imagine anyone willing to make such stupid bets, the bullion banks known as commercial traders have shorted more than 200 percent of all known silver inventory!
Jeffrey Christian of the CPM Group has admitted that banks have leveraged their physical bullion by 100 to 1. This means for every 100 ounces of paper gold/silver that trade, there could be as little as 1 ounce of physical gold/silver in the vaults backing it… Most investors around the world holding paper gold/silver believe they own physical gold/silver. There will come a time when these investors don’t want cash settlements in U.S. dollars, but will want the physical precious metals themselves. When investors around the globe eventually call for physical delivery of their precious metals, NIA believes it will result in the biggest short squeeze in the history of all commodities.
The problem with shorting, is that eventually the short positions have to be bought back. Finally when the stars align and the conditions are right, you will see the mother of all short squeezes… This is one of the primary reasons everyone should buy physical silver and gold instead of paper claims to gold & silver. These commercial bullion banks are offering a lot of paper contracts that are impossible to deliver on.
7) Silver Leasing
According to Ted Butler there are/were about 150 million ounces of gold and about 1 billion ounces of silver that have been leased out. What doe this mean? It means that some gold & silver producers at one time or another did not have enough gold or silver to sell to their customers, so they leased (borrowed) the metals from others (like central banks) that had ample supplies at the time. The producers then would sell these metals to their customers creating a phantom supply of gold and especially silver. The problem here is that all of this leased gold and silver has to eventually be produced or paid back. It is the equivalent of borrowing money and living off of it with the plan of paying it back at some point in the future. So the 1 billion ounces of silver has to be produced/repaid at the some point, all the while silver demand continues to increase along with yearly silver deficits. According to Guide to Investing in Gold & Silver, it would take a 100% mining devotion for two years to repay all the gold and silver leases outstanding.
Investors looking for a safe and very profitable investment should definitely have silver as a part of their investment portfolio. Silver is the greatest investment one can make at this point in time!
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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