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Above-Ground Silver Is More Rare Than Gold

Headwinds for Silver
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EDITOR NOTE: Silver has long held the reputation as “the poor man’s gold.” That notion still remains today, as safe-haven buying is often seen first in the yellow metal’s prices. It’s strange though, as silver--both a monetary and industrial metal--has more use than gold. Perhaps scarcity had something to do with it. But today, there’s less  above-ground silver than gold. What many people might not understand is that the Gold Standard did not exclude silver. And right now, silver may be much more valuable functionally than gold. Both precious metals have pulled back. Despite silver’s lower price, it actually outperformed gold and stocks in 2020. Due to its shortage, low price, and increasing industrial demand amid physical shortage, silver is poised to outperform all commodities this year. Many financial analysts would agree. We’re not seeing it yet, but that’s because investor demand, along with legacy industrial and renewable energy demand has yet to kick in.

Silver is one of the best-known precious metals today for three main reasons. First, silver is a naturally occurring metal that isn’t manufactured or created in a laboratory. Second, silver is highly sought after by many people. Third, and most important, silver is rare. If they’re interested in buying silver bullion, Scottsdale precious metals collectors might be interested in the following facts about the rarity of silver.

Silver vs. Gold

Interestingly, above-ground silver is actually more rare than gold. In fact, almost all the gold that has been mined to this day is still here, and its use is largely limited to currency, portable wealth, and jewelry. On the other hand, when silver gets used, it’s gone forever. Also, unlike gold, silver is used in all types of industries. In addition to being used as currency and bullion as well as to make jewelry and objects of art, silver is used in military applications, the medical field, photographic applications, water purification systems, and the electronics and tech industries. This is thanks to silver’s antibiotic and thermal conductive properties as well as the fact that it doesn’t corrode.

Supply & Demand

The demand for silver has vastly increased for many reasons over the years, and this has resulted in almost completely eliminating the above-ground stockpile of this precious metal. As a matter of fact, if things keep going the way they currently are, there’s a huge chance of a silver shortage in the coming years.

In addition to the increased demand for silver, there are constraints on supply. The cost of mining silver actually exceeds its selling price. In fact, the majority of silver is mined as a byproduct of other metals, and for approximately every 27,000 pounds of earth, there’s only one gram of silver. This, combined with the very low spot price of silver, renders mining this precious metal less profitable than mining other metals.

Market Prices

That being said, silver is currently considered a very rare and undervalued above-ground precious metal. Although it’s running at a supply deficit for the time being, many speculate it’s only a matter of time before the price of silver reflects its true value.

Furthermore, there are probably many reasons silver’s spot price is low. Some speculate the industry plays a role in keeping the prices low. By undervaluing this precious metal, the supply costs will remain low and the profits will remain high. Moreover, there’s also a problem with the way silver is marketed. If people truly understood the value of silver and the investment opportunity it presents, silver would definitely be sold out. 

Original posted on First National Bullion

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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