leading australian silver producer., page-33

Why is silver a better investment than gold?

The U.S. government has already exhibited a total disdain for its citizens as long ago as 1935, when it seized, totally unlawfully, the people's gold. (http://www.helpfreetheearth.com/news152_money.html) Could they do it again? You betcha!

An ounce of silver is cheaper and easier to use "as money" than an ounce of gold which is headed for $1,500 an ounce. Silver has all the same monetary properties of gold, and more. The historic price ratio of silver to gold shows that about 10 ounces of silver would buy one ounce of gold, a 10:1 ratio. Recently, the ratio is about a 50:1 ratio (at the time of writing with silver at $14.72/oz., and gold at $786.24/oz.) As the silver to gold ratio returns to historic values, from 50:1 to 10:1, you may make over 5 times more money investing in silver than gold.

Silver prices may rise to exceed the 10:1 ratio, for the following reasons: More than all of the silver produced by the mines each year is consumed by industry, which leaves little to no room for substantial investment demand. The tiniest bit of investment demand will drive prices sky high. As paper money continues to fail, people will buy silver and gold without regard to price, or they will buy simply because prices are going up!

Silver mines produce about 650 million ounces of silver each year, about 200 million ounces come from scrap recycling, and about 100 million ounces used to come from investor selling, or government selling. That's a total of about 950 million ounces. Of that, about 42% is consumed by industrial use, about 28% consumed by jewelry, 20% consumed by photography, 5% consumed in coins and medallions, and that's 95% of total available silver each year! This implies either a "surplus", or "investment demand", of about 5% of the total. Investment demand remains small, but is growing!

Due to silver use, or consumption, since the 1950's, silver may now be more rare than gold, in above ground, refined, deliverable, forms. It is estimated that there are about 200-300 million ounces of silver available to the market at the present time. There are about 125 million ounces of silver at the NYMEX, the big commodity exchange in New York. Each silver contract at the NYMEX is a promise. There are too many contracts, too many promises to deliver silver that may not exist. Each contract is for 5000 ounces. There are often over 175,000 contracts for 5000 ounces, that's a total of 437 million ounces of silver, promised to be delivered. Yet the exchange has only about a third of that in real silver. How can they promise to deliver more silver than exists? If they fail to deliver silver, according to the promises and contracts that they have made, then confidence in the world's entire financial system may collapse. Industrial users of silver may have to shut down their factories. To prevent this, the users will bid silver prices much higher.

Due to the risk of default in the silver futures contracts, avoid buying futures contracts, avoid options, and avoid storing your silver with anyone else! Take delivery of your silver. Ssilver began to lose its status as money starting in the late 1800's, as nations stopped using silver, and started using only gold as money. Over 100 years of this "demonetization" has caused a serious drop in silver's value, and this trend is about to be reversed as investors learn about silver's intrinsic properties (and market fundamentals) again.

In the end, as paper money fails completely, the neglect of silver’s use as money will be over. Once again, silver will be valued based on other measures of value, such as a day's wage, or a ratio to gold. If silver exceeds its historic value due to the scarcity, from its importance in electronics and photography, then perhaps a silver dime, silver quarter, or silver dollar’s worth of silver will be worth far more than a day's wage, as it once was.