Guest Post by Simon Black
In 663 BC, King Ashurbanipal of the Assyrian Empire invaded Egypt and sacked the city of Waset (located in modern day Luxor on the Nile River).
Ashurbanipal vanquished the city, purportedly seizing more than 75 metric tons of silver for his personal collection.
At the time in the ancient world, the prevailing ratio between gold and silver was 1:2. In other words, 75 metric tons (= 75,000 kilograms) of silver was worth 37,500 kilograms of gold, equal to $1.76 billion in today’s money.
That 1:2 gold/silver ratio had held for thousands of years across Persia, Mesopotamia, and Ancient Egypt, possibly since as early as 3,000 BC.
But over time it has changed periodically.
By the time of Alexander the Great in the 300s BC, the Gold/Silver ratio had shifted to 1:13. Mining techniques had advanced at that point, so the ancients were able to produce higher volumes of silver than ever before.
Under Julius Caesar in Ancient Rome, one ounce of gold was worth 12 ounces of silver. In the time of Mohammed and the early days of the Islamic Caliphate in the 600s, the ratio was 1:16.
Even in the early history of the United States, the Mint and Coinage Act of 1792 established a gold/silver ratio 1:15.
(According to the law, one US dollar is defined as 1.604 grams of pure gold, or 24.1 grams of pure silver. So those pieces of paper in your wallet are not technically US dollars, but ‘Federal Reserve Notes’.)
In our modern times, the ratio average is around 55 ounces of silver per ounce of gold.
Much of this is due to continual improvements in mining techniques– it’s a lot easier to mine than it was 5,000 years ago, so the ratio is more indicative of the natural abundance of these metals in the Earth’s crust.
But the gold/silver ratio also fluctuates from time to time based on market conditions.
Gold is pretty unique; while there’s a fair amount of demand for gold from the jewelry industry, and a bit of gold used in industrial production, the key driver of gold demand is from investors, foreign governments, and central banks.
When times are tense, people buy gold and the price goes up.
And as we’ve been discussing, foreign central banks are starting to dump their US dollars for gold, scooping up hundreds of metric tons of the stuff.
But silver is different.
Less than 20% of silver demand is from investors– usually smaller, retail investors. Because it’s so much less expensive than gold, most foreign central banks and governments don’t even bother buying silver. They only buy gold.
The primary driver of silver demand is jewelry and technology; silver is used in a variety of industrial applications like batteries, water purification, semiconductors, and dental equipment.
This is an important distinction to understand: in a difficult economy, demand for silver from industry and jewelry will likely DECREASE, causing silver prices to fall.
With gold, on the other hand, a monetary crisis, trade dispute, war, etc. would likely cause gold prices to increase.
But don’t write off silver just yet.
The Gold/Silver ratio right now is around 1:84… that’s 84 ounces of silver per ounce of gold, close to an all-time high.
Over the past decade it’s been as low as 32 and as high as 93. So it stands to reason that a correction may be in order.
There is, of course, no fixed requirement that the gold/silver ratio maintain a certain level. It could go to 100… or even 1,000. Or go back to 1:15.
But just as I’ve been arguing for the last 12+ months that gold prices should be heading higher (and they’re more than 30% higher since I started writing this), silver could also move quite a bit higher.
First– while investor demand isn’t the primary driver, it would be foolish to dismiss this factor.
Investor demand is currently low. According to data from the US Mint, the average number of one-ounce Silver Eagle coins sold over the last three years is HALF as much as the average sales from the previous eight years.
Bottom line, investors aren’t as interested in silver as they used to be. And that’s usually a good time to start thinking about buying an asset.
Simultaneously, central banks around the world keep slashing rates and printing money.
Even in the United States, which is supposed to have a ‘tremendous’ economy, the central bank has turned once again to Quantitative Easing, and recently announced that they would print more than $60 billion per month to buy US government bonds.
Another key fact in this analysis is that silver production is falling.
Most of the gold that is mined ends up sitting in a vault somewhere, or in someone’s jewelry drawer. So as mining companies pull more gold out of the ground each year, that supply increases.
But with silver, most of the silver mined this year will be used up in industrial production. So the companies that make fancy tableware or dentists’ drills will need new supplies of silver next year in order to manufacture more product.
If those companies are growing, they’ll need even more silver… so, as long as the global economy generally keeps growing, industrial silver demand should keep growing.
But silver production is actually falling… so silver prices should increase as a result.
And because central banks are simultaneously printing tons of money, prices could increase even more due to renewed investor interest.
Like I said, silver is pretty much dead right now. US Mint sales figures show there’s very little investor demand. That makes now a great time to start thinking about silver– BEFORE it becomes popular again.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
DONKEY…….HOLD!!!
Hahaha, Mark, it is beyond funny that you wrote here. I’m frustrated as hell with my silver.
Just remember that old truism…’Every Donkey gets his day”!
Silver the worst PM investment I ever made. The best I think would have been palladium.
Palladium Dec 19 $1,731.85/oz. NOW
Palladium in 2011 was around $600/oz.
It all depends on ‘when you bought’ and what was your plan? PMs aren’t an ‘investment.’ Silver is gentlemen’s real money, a hedge, insurance, a *macro legacy for daily use in HARD TIMES that will require HARD MONEY. Maybe in your time…maybe in your loved one’s times…but as history repeats itself over and over…its time is right around the 4th Turning. People who are looking for investment instant gratification with PMs are in the wrong market.
I have a dirt cheap term life insurance policy for 500k I bought when I had a child and a wife to protect as a young man…been paying for it monthly. Man, if I would have put that much into PMs I’d be set…oh wait a minute I did! Don’t need the life insurance anymore, it runs out in 2 years when I’m 72, and if I’m not dead its useless! But what the hell…if I go home my loved ones will inherit it, although in two years 500k of fiat could just be toilet paper. And when that inevitable fiat crash to true value happens…and it will…it’s called history…PMs will return to their true value…not valuable…but invaluable…legacy, generational wealth.
Just like ‘Parris Island 69’ I started buying silver in the early 80’s. I went in big in 99 and 2008 and cost averaged all the time.
I made money in ‘investments’, but PM’s are the real TREASURE…they always have been and they always will be.
1. Gold is the money of Kings (Wealth)
2. Silver is the money of Gentlemen
3. Barter is the money of Joe Sixpack and Jane Amazon
4. Debt is rabbit money of serfs & slaves (and fiat is the turtle in the race to bankruptcy)
Number 4 is right around the turn at the corner of SHTF & 4th.
https://www.macrotrends.net/1470/historical-silver-prices-100-year-chart
Silver Prices – 100 Year Historical Chart
Interactive chart of historical data for real (inflation-adjusted) silver prices per ounce back to 1915. The series is deflated using the headline Consumer Price Index (CPI) with the most recent month as the base. The current month is updated on an hourly basis with today’s latest value. The current price of silver as of October 18, 2019 is $17.58 per ounce.
I don’t get it. In 1969 it was $1.79. In all this time it’s only gone up to $17+? Doesn’t seem like a good investment over a 50 year span.
Donkey,
You are not getting it…it’s not an ‘investment’ it’s a hedge, insurance, hard money for hard times.
It has been over $50 twice since the 80’s, and can be volatile…at this moment in time I would not sell your silver unless forced. When all the manipulated, controlled, bullshit markets return to true value you will be thrilled to own some.
https://www.mining.com/web/the-forgotten-history-and-potential-future-of-silver-as-money/
They call this guy the ‘Robin Hood of Wall Street’, he has a good take, tells the truth, sells nothing, and sees through the lies. His vids are brief, and he has a good take on silver. Watch him now and then…he will give you good heads up predictions.
https://www.youtube.com/user/GregVegas5909/videos
I’m listening. How bad do things really have to get to where silver is gonna be all we envision it will be? In the depths of the 08 meltdown it never became a mainstream currency. It seemed, at the time, when silver hit $50 this last time it was simply wall street running from stocks to PMs and then back to stocks again. Short window.
I can’t answer your question…no one can. We are in a time like no other in history, and it appears to me the greatest ongoing wealth transfer in history is about to hit as Space Balls would say: Ludicrous speed!
I think 2020 could be the flash point but I hope for more time.
I’m amazed it hasn’t already happened. What they have done to hold off the ‘Everything Bubble’ from popping was behind most people’s wildest imagination, including mine.
I’m convinced that when the next inevitable recession hits, it will be the worst one of my lifetime, and the prep I have, including silver will skyrocket in value. One more year? Two more? Three? I doubt it will be longer than that at the longest.
Shoot Donkey, If I wasn’t building a house I’d be buying more.
My speakers are blown, haven’t listened to this one but he will cover everything including silver.
Agree Silver will skyrocket as it’s vastly undervalued now
I’d say that increase is pretty incredible actually
Happy to take all your silver, Donkey for a 20% discount from spot…..put up or shut up.
Put up or shut up what?
john,
too bad that rdawg seems to have gone the way of the dodo bird–
i bet he would have taken your offer–
Maybe production is down BECAUSE THERE IS NO DEMAND!!!
Silver is an industrial metal, there’s always demand. Once upon a time silver was used in film processing, still is but not nearly as much due to digital photography. Beyond it’s uses, silver is an intrinsic store of value. You hold silver as insurance, not because of investment. Perhaps there comes a time when your paper money is devalued or useless. Silver will still get you goods and services.
Also, precious metals prices are heavily manipulated, generally so governments and banks can buy at deflated values.
What collateral stands behind the US dollar now that the gold standard no longer exists? The full faith and credit of a nation with trillions in debt? Once upon a time you could take that paper dollar and cash it in for silver because silver had intrinsic value over paper.
Extant Silver is equal to or less abundant than gold even though is is 14-18 times more frequent than gold in earthly deposits. Silver is a major commodity that is consumed in production of so many things and ends up in micro deposits in the world’s landfills.
If you are smart and trying to prepare for the coming spicey times buy silver and not ETFs because, if you don;t hold it, you don’t own it.
It is selling very near the cost of production (Thank you JP Morgan). Do it now.
I became interested in silver in 1980 when the Hunt brothers ran the price to $50. I was 30 then. In ’93 I put it together how the price was suppressed in the futures market with paper derivatives. Realizing the scam for what it was I nevertheless knew that one day, possibly not in my lifetime, silver would break out. Over the years I paid an average price of $7 an ounce for it and at 70, have given it to my children. I won’t say what quantity. I will say that I hope sometime in their lives they’ll look back and say “hey, ya know the old man was one shrewd guy”. If it happens in my lifetime, all the better.
Bad move on giving it to the kids now. If you are in your 70’s then i guess they are in their late 30’s to 40’s. Putting them squarely in their highest debt load and toughest time for marriages. I will never give any thing of importance or of value to anyone under age 65. Even if they are broke and lived badly by that age they see their mortality, have lots of life experience, and even the ignoramus’s have some wisdom learned by then. Any earlier and a greedy ex wife, kids, grandkids, or boat can easily be bad decisions made to cash it in. Seen it heard it hundreds of times……
I think this is great advice. My daughter married a trust funder. The family owns thousands of rental units as well as entire apartment complexes and commercial space. They just completed a 50 acre (I don’t think that number is correct. I’m going off of what a family relative told me) rental/commercial development on the water in Richmond. Anyway, each of the kids were given shares in the company. They gave him his shares waaaaay too soon.
He really did not do a good job of explaining silver uses and how much of it in tech and manufacturing the silver is used and then never regained. It is gone forever Unlike gold nearly every ounce ever mined still exists today. Silver can be broken down and evaporated. Gold cannot. If you can never get rid of something but keep finding more it seems it would lose value. Whereas something like silver that once used is gone and you need to find more would or should be more valuable over time as inventories reduce. I do agree we have long remained at a historic spreads on gold/silver ratios.
” the silver is used and then never regained. It is gone forever Unlike gold nearly every ounce ever mined still exists today. Silver can be broken down and evaporated.”
Utterly and totally wrong. Silver atoms do not become carbon atoms, iron atoms or silicon atoms, outside of atom smashers (nuclear processes) that are not used in industry, common in laboratories or normal in nature. What happens generally is that they become dispersed. What does that mean?
In manufacturing you can deposit silver by electroplating, PVD (real evaporation, but onto another surface to condense again) and similar methods and get surfaces of silver one atomic layer thick, if that’s what you need. It’s fairly simple and economic to mine silver (even if it’s mixed up with some tin, vanadium, or other metals) and separate them IF there’s enough silver to sell when you’re done. That might be a few grams per ton in gold ore, a few weight percent in other ores or pure veins of silver running in other ores in a mine. As long as you’re already mining gold, the additional equipment and energy required to recover the silver is a minor investment, and pays back at low concentrations.
But when you’re talking about a milligram of silver per pound of [iron / copper / silicon] then it’s not economically feasible to recover the silver: you spend more in energy and equipment than you can get back in sales from the recovered silver. Not to mention the ores are easier to recover silver from than the mixed scrap; and few scrap metal recyclers have the equipment needed to do it.
Less any trivial losses in laboratories, all the silver ever mined is still here. It’s just plated out on a couple of million tons of scrap iron and other metals, and cannot be economically recovered to sell. And no, it’s not a trivial point: future technologies MIGHT be able to recover that silver from the scrap, just not the current ones. And thermodynamics forbids silver atoms from suddenly turning into anything else!
silver is sitting on $17 support, which happens to be a 50% retracement from the May low to Sep high. It’s been a sane and orderly pullback, nothing to fear by the bulls. If $17 fails to hold, then I’d start getting concerned, but I’m not selling my silver at any price. I’ll be buying more on a solid move above $18.
“They” are manipulating the price of PMs and have for some time so assuming that the price of PMs is going to do what it should do is pointless. If we could figure out why they’re manipulating the prices, what their end game is, and when, we could all be rich as kings. My guess is that they’re suppressing the prices of PMs (at least gold and silver) while they buy all the physical that they can. When they’re done with that phase they’ll either just let the price rise naturally or give it a good strong push up the same way they’ve been pushing it down. Will they push it down further before they push it up? When will the push up start? Will it be in my lifetime? I have no idea.
I was thinking about silver just the other day. In researching silver early in 2000, I came across a commodity trading group called the Silver Users Association. A question came to mind, why was silver the only commodity with it’s own users association?
In following up my quest on silver last week, I came across another site by Charles Savoie https://www.silverstealers.net/ which introduces a society based in London and New York City, called The Pilgrims Society. This Society has been controlling silver for over a hundred years, and was behind the push to demonetize silver.
Charles provides a pdf file on his research into the history of silver titled “The Silver Stealers” http://silverstealers.net/tss.pdf History is important as Santayana stated that “those who cannot remember the past are doomed to repeat it.” Our Government in the past made the ownership of gold and silver unlawful, could they do so in the future under another contrived emergency?
Interesting times.