Why Silver Over Gold - Reasons Silver is a Better Investment

Why invest in silver over gold?

Simply because silver should outperform gold percentage wise.

All of the factors that will push gold up will push silver up as well. The main differences are that the historical ratio of gold to silver has been around 1 oz of gold for every 16 ounces of silver whenever silver and gold were monetized. Silver should meet again with gold at 16:1 in the near future, but with industrial demand for silver being much bigger than it was ever was and still rising and the industrial demand for gold staying about the same, we should see a even lower ratio favoring silver. Many of the advantages of investing in gold apply equally to silver, but not the other way around. 

Remember this: 50-60 years ago, there was about 10 billion ounces of silver available. And the world mining production was 200 million. The world had about 1 billion ounces of gold.

So the above ground supplies of silver and gold were 10:1.


In the time since then the world has used up most of that above ground supply of silver, and now we have less than 1 billion ounces left.
The gold supply however has grown from 1 billion to 5-6 billion ounces since then (we don't consume as much gold as we do with silver, and much of the gold we do consume we recycle). What used to be a 10:1 ratio between above ground supplies of silver and gold is now a 1:4 ratio and this may push silver close and closer to the price of gold, with the possibility of silver being valued more than gold in this next decade. Remember, there is still more silver to be mined below ground than there is gold - the above numbers are only for above ground supply. Nevertheless, things have really changed but the market has not adjusted for it accordingly.You want to be situated correctly when the market DOES adjust. Buy physical silver!


All of the other factors pushing up gold will also push up silver. This includes inflation, uncertainty in the middle east, fears about Greece and other European nations default, mass awakening to the truth about fiat currency, major countries moving away from the U.S. dollar as the reserve currency, China and India promoting silver and gold investment to the public, people in America wanting to return to constitutional money - gold and silver, and many other factors. 


The difference is that silver has OTHER major factors going for it in ADDITION to the factors that push up both silver and gold, that gold does not have.This includes: silver being more manipulated downward than gold is on the stock market, silver being much more necessary for society as an industrial metal as well as a precious metal, less above ground supply available, that this time the money re-evaluation will involve more people that ever - with most unable to purchase gold because gold is too expensive for the mass numbers of poor people in the world - they will flock to silver instead, the need to return to at least 16:1 ratio from today's 40:1, the fact that we are using more silver at an increasingly growing rate as society and technology advances, the public is currently more focused on gold than silver, and other reasons.

Gold and silver are both great investments. It's just that silver should outperform gold. Gold and silver both undervalued. Simply is just MORE undervalued than gold. Silver has been a supply deficit since 1990.
Year after year for a few decades now the supply demand deficit has been chipping away at the above ground supply of silver. In 1980 when silver hit $50 per ounce there were about 2 billion ounces of silver above ground and now there is only about half a million ounces above ground.  The rest of the silver is hoarded as investment or in jewelry and in industrial applications.

 

As global demand increases the supply deficit will grow larger until more mines must be opened to offset the demand. This will not happen until the price of silver rises tremendously as much of silver mined today is as a byproduct of mining other precious metals. At these prices it simply isn't profitable enough. This is another major factor driving the price of silver up, but the price is still being manipulated down very effectively. This upward fundamental force for silver combined with the downward force through manipulated paper supply makes silver tremendously UNDERVALUED.

Silver is mined primarily as a byproduct of other metals. when precious metals go up or down, silver is affected too. At today's prices, it is not as worth it to mine for silver as it is to mine for gold. Therefore, we would need higher silver prices for it to be profitable to open up silver mines.

We think silver could perhaps trade at 10:1 or even lower to gold on a sustained basis. A ratio slightly lower than the historical 10:1 might be achieved in a spike but lower than 1:1 is not possible in the near future unless prices are manipulated. 

The average person can’t afford to buy gold. Gold is more of an asset class suitable for investment, the wealthy, and banks. As silver is much cheaper the average person can go to a coin ship down the street and buy some silver coins.

Since the silver market is smaller, prices increases and decreases are more volatile as at takes less money to influence it. Since we know silver must move upward, that the movement should be more volatile than in gold, we know that silver will move upward with gold but faster. 

In history, silver has been used more as money than gold has. In many times and places it was used as the common denominator for trade when gold was not used.

In many languages silver means the same thing as money, many more languages than gold. Why silver, not gold? 

You have to consider that there is a larger short position on silver than there is above ground supply. That is insane! What if there was a larger short position on a stock like Apple or Yahoo than there were stocks? That manipulation through huge short positions is a huge downward force on the price of silver making silver extremely undervalued. This is a force that is being revealed with justice and will soon stop compressing the price of silver, and silver will bounce back like a loaded spring. 

 

Because silver is cheaper, it has a lower entry point. Since we are in a recession, people don't have that much money to invest. Most people who decide to invest in precious metals will not have enough for reasonable amounts of gold, especially if they are coming late into the market when prices are already rising fast. They will choose silver instead, naturally. And when they go online to do research on silver and gold, they will see all the information that leads to the conclusion that silver is a better investment percentage-wise, although gold is great.

This means more money will enter the silver market rather than the gold market, another force that pushes up silver over gold.

If/When the economy finally starts recovering, industrial demand for silver will rise. If the economy collapses, people will go to silver as a hedge against inflation and the dollar.

In either case, this is great for silver. This is why you should invest in silver over gold - why silver makes a better investment at least at today's prices.

Please continue to read the other key articles on silver investing.

More Resources:

Why Silver Will Outperform Gold (though Gold is great too!)

An excellent article by Golden Economizer (http://seekingalpha.com/article/263874-12-reasons-why-silver-will-outperform-gold)

Or more accurately: Twelve reasons silver will CONTINUE to outperform gold. As I write this, the spot price of silver is $42.30, and the spot price of gold is $1478.20

1) In the past year, gains in silver have outperformed gains in gold by nearly 500%. In the past 365 days, the price of Silver has appreciated 129.5%, more than doubling, while the price of gold has appreciated only 27.4% (source: finviz.com). We all know that past returns are no guarantee of continued future performance, but the exact same fundamentals are still in place that caused last year’s differential in returns, with no sign of any change on the horizon. Over this same 365 day time period, Crude Oil has returned 26.9%, the Nasdaq 100 has returned 13.2%, the DJIA has returned 10.3%, the S&P 500 has returned 8.5%, the 30 Year US Treasury Bond has returned 3.1%, the 10 Year US Treasury Note has returned 2.3%, and the US dollar has returned NEGATIVE 6.8% (-6.8%), a LOSS of nearly 7% (source: finviz.com).

2) Silver posted an average price of $20.19 in 2010, a level only surpassed in 1980, and a marked increase over the $14.67 average price in 2009. This buoyancy is very much alive today, with the 2011 price averaging $31.86 [as of April 7], based on the London fix, through the end of the first quarter. (source: silverinstitute.org)

3) World silver investment rose by an impressive 40 percent last year to 279.3 million troy ounces, resulting in a net flow into silver of $5.6 billion, almost doubling 2009’s figure. Implied net silver investment increased by 47.5% from 120.7 million ounces to 178.0 million ounces (source: silverinstitute.org)

4) Exchange traded funds registered another sterling performance in 2010, with global ETF holdings reaching an impressive 582.6 million ounces, representing an increase of 114.9 million ounces over the total in 2009, an increase of 24.6%. (source: silverinstitute.org)

5) Silver Coins and medals fabrication [in 2010] rose by 28 percent to post a new [global] record of 101.3 million ounces. In the United States, over 34.6 million U.S. Silver Eagle coins were minted, smashing the previous record set in 2009 at almost 29 million. (source: silverinstitute.org)

6) In January of 2011 alone, the U.S. Mint sold 6,422,000 ounces of American Silver Eagle investment coins. In the first three months of 2011, the U.S. Mint sold 12,429,000 ounces of American Silver Eagles. At the current rate of sales, the American Silver Eagle program will increase its sales by 43.7% to 49.7 million ounces this year, smashing last year’s all time record. Source: (usmint.gov) This result has been achieved despite production delays and continual shortages of silver blanks at the mint due to mismanagement of the program, in violation of the law requiring the mint to provide adequate supply to meet public demand.

“For the weekly period ending March 9, the US Mint recorded sales of 668,500 of the one ounce Silver Eagles. This compares to 1,509,000 coins sold in the previous week.

Since the start of sales for the 2011-dated coins, the US Mint has carried out sales under their standard allocation program. Rather than accepting unrestricted orders, available supplies of silver bullion coins are rationed amongst the authorized purchasers. As such, sales figures reflect the number of coins that the US Mint is able to produce and make available, as opposed to the level of demand from the market.” [Source:goldandsilverblog.com]

7) On April 7, 2011 the House Financial Services Subcommittee on Domestic Monetary Policy held a hearing on “Bullion Coin Programs of the United States Mint: Can They Be Improved?” Some highlights from Subcommittee Chairman Ron Paul:

a) It is "imperative" that the U.S. Mint should be able to produce an adequate supply of coins to the U.S. public. According to Rep. Ron Paul, investors are rushing to purchase gold and silver due to quantitative easing by the Federal Reserve.

b) The U.S. Mint should take the appropriate steps to source enough planchets to meet public demand for gold and silver coins. People are worried, stated Rep. Paul, and are trying to preserve their wealth through the purchase of gold and silver due to government policies that will lead to inflation and debasement of the currency. Rep. Paul stated that "If we had a sound currency" there would not be a shortage of gold and silver coins since demand by the public would be a non event.

c) Rep. Paul detailed the "horrendous huge debasement" that has occurred with the U.S. currency. In the early 1930's, when gold was on a fixed exchange rate with the U.S. dollar, the dollar was worth 1/20 ounce of gold. It was subsequently devalued to 1/35 ounce of gold during the 1940's, to 1/38 ounce of gold in the early 1970's and to 1/42 in 1973. Once it became legal for U.S. citizens to own gold and the dollar was based on market prices, the value of one dollar subsequently dropped to 1/1450 ounce of gold.

d) Rep. Paul noted that total annual demand during 2011 for Silver Eagle bullion coins should reach 48 million ounces, but that total U.S. silver production would amount to only 40 million ounces. The U.S. Mint should take all necessary steps to ensure that adequate supplies of silver are available to meet public demand for silver coins.

e) By law, the US Mint is required to produce coins "in quantities and qualities that the Secretary [of the Treasury] determines are sufficient to meet public demand". There were no U.S. Mint representatives present at the Subcommittee hearing to explain why the U.S. Mint is unable to comply with production mandates specified by law.

(Source: House Committee on Financial Services)

8) In 2010, the total U.S. mined Silver Production was 38.6 million ounces.89.6% of all silver mined in the U.S. in 2010 was consumed JUST by the American Silver Eagle program of the U.S. Mint, leaving only 10.4% of all U.S. mined silver for all other investment use (bars, ETFs, privately minted coins), all industrial use, jewelry, photographic use, medical use, etc. (source: silverinstitute.org)

9) Total global silver fabrication demand grew by 12.8 percent to a 10-year high of 878.8 million ounces in 2010; this surge was led by the industrial demand category. Last year, silver’s use in industrial applications grew by 20.7 percent to 487.4 million ounces, nearly recovering all the recession-induced losses in 2009, and is now seeing pronounced advances in 2011 (source: silverinstitute.org)

10) Global Silver mine production rose by only 2.5 percent to 735.9 million ounces in 2010 despite a 37.6% increase in the average price of silver from 2009 to 2010. The difficulties and rising costs of silver mining have caused silver to have one of the most inelastic supply curves of any commodity.

11) Silver is continually consumed, unlike gold. Industrial uses of gold have purposely been minimized due to decades of high prices, and it is very efficiently recycled. Silver is just the opposite. Decades of price suppression have resulted in many and increasing industrial uses of silver, and has made it uneconomic to recycle. Since many uses of silver are in small or microscopic amounts, that silver can / will never be recycled, as it is continually discarded into landfills.

12) Publicized Silver Inventory figures are fraudulent, because they include the Silver held by ETFs. As of the end of 2008, two thirds of official world silver inventories were fictitious. Quoting a highly recommended article by Jeff Nielson:

“From 2005 to the end of 2008, after silver inventories plummeted by 90% in just 15 years (due to being grossly under-priced), we are supposed to believe that inventories suddenly 'made a U-turn' – and tripled over the course of just four years.”

“Anyone with even a slight understanding of markets should recognize the obvious sham here. An “inventory” is the amount of a particular good warehoused and ready-for-sale. Conversely, the units of SLV (and all other bullion-ETF's) represent privately-owned silver which has obviously been taken off the market. As a matter of elementary logic, it is impossible for even one ounce of silver to be both an “inventory” and an “ETF”. It can be one (silver-for-sale) or the other (privately-owned) but not both.Thus, at the end of 2008, two-thirds of official, global inventories of silver were nothing but an obvious paper-sham.”

[Source: Fifty Years of Suppressing Silver]

During the four year period referred to by Jeff Nielson when Silver Inventories supposedly tripled, the world mined silver supply increased by just 7%, from 637.3 million ounces to 681.9 million ounces.

WORLD SILVER SHORTFALL (MILLIONS OF OUNCES) (source: silverinstitute.org)

Here are some great videos on this topic. Credits go to the respective producers of each video. These are from YouTube. You can click "Watch this on Youtube" to video the original video on YouTube.

Why Silver Over Gold - Videos