Over the last few decades, there has been a shortage of physical silver. In 1950, there were about 10 billion ounces of silver giving the world a supply for the next 140 months. By 1970, the inventories could supply for 70 months. By 1990, this had shrunk to about 55 months. By 2010, the supply would last for 11 months. This translates to about 700 million ounces of inventories. Compared to 1950, this is a 93% reduction in the silver inventories.
Yet demand continues to surge, despite all the new silver mines. The world has consumed a lot of silver over the last 50 years. The consumption and uses of silver is accelerating. In 1999, 100 million ounces of silver went into the electronics industry. By 2011, it is projected that about 250 million ounces would be required by the electronics industry. The new uses for silver are also expanding. For instance, in 1999, the amount of silver used in solar panels was so small that the number was hardly being reported. By 2010, 75 million ounces of silver were being used by the solar panels industry. By 2014, it projected that about 130 million ounces would be consumed by the solar panel industry.
The investments in silver are also on the rise. In 2010, about 35 million American Eagle silver coins were minted. This indicates that about 4.8% of the total silver mined in 2010 went into the production of a single coin. The odds of these coins being melted back are almost zero as this is the most popular collectible coin n the world.
There is silver shortage in the global markets. New mines in the US and Canada take about 10 years from the time of discovery to the mining of a single ounce of silver. In Nevada, the silver state, there is evidence that the silver production already peaked. In 1997, Nevada produced 25 million ounces of silver. By 2010, production had collapsed by more than 70% to 7.3 million ounces. According to a research titled “Peak Silver Revisited”, of the top 8 silver producing states in the US, all of them had peaked production despite the new technology. The ore grade has collapsed by about 95% and it is getting harder and harder to mine silver. Right now, about 1 ounce of gold is being mined for 10 mines of silver. But gold is approximately being traded about 50 times that of silver.
The investment opportunity in silver is great. Silver which is required by the industry for everyday uses is being traded on the COMEX about 100 times more than the actual physical supply. About a billion ounces of silver are traded on the paper markets. The supply of silver is being distorted due the price of $30 per ounce.
It is projected that there will be a shortage of physical silver by 2020. Due to the current system of melting, there could be a shortage by 2015. In case of a possible currency crisis in 2012, investors are expected to rush to silver as a safe haven. The demand for silver would be overwhelming. There is no doubt that silver presents a good opportunity for the common man to invest and benefit from the silver shortage in the physical market.
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