Can You Pass the 2011 Silver Quiz?
CPM Group’s recently released its 2011 Silver Yearbook…[which] presents some interesting facts that paint a decidedly bullish picture for the metal going forward. If you’re a silver investor, and/or are concerned about the recent selloff, you may find the following data very compelling. It provides an inside track on the market and will certainly make you a more knowledgeable investors.[Read on!] Words: 1280
So says Jeff Clark (www.caseyresearch.com) in excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted 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. Clark goes on to say:
For fun, I put what I read into the form of a quiz. See how many you can get correct…
Question #1: The #1 driver for silver’s price increase in 2010 was:
- Investment demand
- Fabrication demand
- Lower supply
Answer: While both fabrication demand and supply rose last year, investors bought 142 million ounces of silver – the third highest level on record, and the highest since 1980. This pushed the price into record territory.
It’s noteworthy that investment demand was higher last year than during the recession year of 2009. This suggests that investors buy silver more out of dollar devaluation and inflation fears than simply due to an economic contraction.
Question #2: Silver mine production:
- Exceeds demand
- Matches demand
- Falls short of demand
Answer: Silver produced from worldwide mining totaled 667 million ounces last year – but total demand hit 986 million ounces. Despite the fact that mine production has increased 33% since 1999, it falls far short of supplying the market’s needs.
While scrap coming to market makes up the difference, this gap is one of the more critical issues going forward. The delicate balance between supply and demand will become increasingly precarious as overall demand continues to grow.
Question #3: Is it true or false that total demand is falling given that household demand for silver (cutlery, flatware, and candlesticks) hasn’t risen in ten years, jewelry fabrication is up but a blip and use in photography continues to fall?
Answer: False. Industrial use has more than made up the difference from declines in other uses, and is pushing demand to new levels. Since 1999, consumption in electronics has increased 120%. Silver usage in solar panels began in 2000 and is up 640% since then. Silver was first used in biocides (antibacterial agents) in 2002 and, while a small niche, it has already grown sixfold. In fact, new uses for silver are being found almost every day, particularly in the biocide arena, making it increasingly difficult to catalog all its growing applications.
The Silver Institute forecasts that total industrial use of the metal will rise 36% over the next five years, to 666 million troy ounces annually. That’s a lot of silver, meaning this portion of demand – which is roughly 60% of all fabrication – isn’t letting up any time soon.
Question# 4: Silver represented what percent of global financial assets at the end of 2010?
Answer: In spite of last year’s record-high prices, silver is, by any account, a miniscule portion (0.007%) of the world’s wealth.
The ratio’s high occurred in 1980, reaching 0.34% of financial assets. Silver as a percentage of global assets would have to grow over 48 times to match the record. It is true that many more paper assets exist today than 30 years ago, but the renaissance in silver will continue to increase its portion of worldwide assets.
Question #5: What country is the second largest manufacturer of silver coins after the U.S. Mint, which sold 34.7 million ounces last year, about 46% of the world total?
- South Africa
Answer: The Austrian Mint contributed 15% of total silver coin sales last year (11.4 million ounces), an increase of 26% over 2009.
Question #6: Of the following groups of countries, which is increasing silver production and which is in decline?
- Mexico, Australia, China, Argentina
- Peru, U.S., Canada
Answer: The countries of Mexico, Australia, China, Argentina are increasing production, while to the surprise of many, each of Peru, U.S., Canada is in decline.
This has direct ramifications for your silver stock investments. Total newly refined supply is expected to surpass one billion ounces for the first time in history this year, so make sure you have some exposure to countries where production is growing.
Question #7: The average cash cost to produce an ounce of silver from primary silver mines is:
Answer: Of the 30 primary silver mines in the world, average cash cost rang in at $5.16 per ounce (net of byproduct credits). This is almost double 2002 levels. The silver price has risen 650% in the same time frame, however, so margins have risen in spite of higher costs.
Question #8: The only governments that hold silver in inventory are the U.S., Mexico and India. How many combined ounces do they hold?
- 55 million
- 155 million
- 255 million
- 355 million
Answer: Only 55 million ounces are estimated to be stored in these three countries. This equals only 5.6% of annual global demand. Governments held approximately 355 million ounces in 1970, but this has diminished largely due to the U.S. decision to stop using silver in its currency in the 1960s and other governments following suit.
No other countries are believed to hold any silver in inventory. Mine production and scrap supply had better keep up, because there is no backup source.
Question #9: China accounts for how much of worldwide mine production?
Answer: Chinese mine supply totaled 102.7 million ounces last year, 16% of global production. China is the third largest silver producer, behind Mexico and Peru.
Mine production in China has more than doubled just since 2000, largely due to Beijing’s decision to deregulate the state-controlled market the year before. This trend is certain to continue, due to rising silver prices and the fact that many parts of the country are underexplored. If you don’t own a Chinese silver producer, you’re missing out on some of the most explosive growth around the globe.
Question #10: What is the weakest month of the year for the silver price?
Summer is usually the most sluggish time of the year for silver, and July is historically the weakest. Got your dealer’s number handy?
It’s clear that the forces underpinning the silver bull market aren’t going away any time soon…Our current monetary issues are far from over, won’t be easily resolved, and will take years to play out. Precious metals are proven forms of protection for this environment.
Silver, along with gold, is your best defense against unsustainable fiscal imbalances and massive currency debasement, and will be a profit center for years to come. Learn everything you need to know about silver – when to buy, what to buy, and how the silver bullion squeeze could affect the market.
1. “World’s Silver Production By Country – And Much More”
2. “It Is Time To Embrace the New Refrain “Got Silver?”
3. “Silver is Now Even More Precious Than Gold! Do You Own Any?”
4. “Asian Demand for Gold & Silver Will Cause Much Higher Prices – Here’s Why”
5. “Silver Is About As Close As You Can Get To A Sure Bet! Here’s Why”
6. “Panic Before the Herd and Win-Win with Silver!”
7. “Don’t Delay: Get Your Fair Share of Silver Today! Here’s Why”
8. “NIA: Silver Will Be the Single Best Investment This Decade”
9. “Why Silver at $398.52 is a Realistic Parabolic Peak Price”
- 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.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.