It’s hard to write
an interesting article on silver, because Ted Butler has covered almost
everything about silver. But, I am excited about something he touched on
recently, because it is something I think about often. I mean the rarity of
silver in the future. We know that, over the past 50 years, the stockpile of
silver and the reserves of silver in the ground are both shrinking.
We also know that of the
billions of ounces mined over the past 5,000 years, we only have 5% or 10% of
it left. And based on government statistics, the reserves of silver still in
the ground will only last for 20 to 30 more years. Today silver may not fall
onto the rare category, but in the future it will have to. I see a lot more
industrial demand for silver in the next 20 years than there is today. Because
of world population growth and tremendous economic growth in China and India, silver will be in much
greater demand as those people strive to improve their standard of living. If
the reserve figures are close to correct, at some point depletion will take
its toll on production, and production will decline. Superimpose that on
increased demand and it means a major shortage of silver.
When Van Gogh and others
made their paintings they could not get enough money to buy a good meal. Some
died poor. Very few art buyers realized the future value in those paintings. They
saw a starving artist whose paintings were dirt-cheap and who was begging
people to buy them. There were few takers. You look at silver and see the $7
price, you hear this talk of rarity and you ask yourself why only Ted Butler
and Izzy, and maybe a few others, see the big
picture in silver?
The answer is simple. Most
of the people don’t invest in value. They invest mostly based on
charts, computer programs and what the price tells them to do. The old
fashioned way of seeking value isn’t used that much anymore.
Ask yourself these
questions:
1. Will silver become a
rare item in the future? My answer is yes.
2. Is silver rarer than
gold now? The answer is yes.
3. Are the silver prices
controlled? My answer is yes.
4. Are only a few people
aware of the silver story? Yes
When most of the people in
the world answer yes to these questions and recognize the true rarity of
silver, and then want to own it, the price will be in the hundreds of
dollars.
You have to ask yourself
why you can buy silver for $7 and gold goes for $450? The answer – the
bullion trading banks have gold to sell and no silver, so they push gold to
the public and don’t let silver prices rise so not to bring demand by
investors, because that will increase the deficit. The tables will turn one
day and those who are naked short silver will have to go into bankruptcy. There’s
no other way out. All the silver in the world won’t be enough to bail
out the shorts, only bankruptcy will.
In my opinion, you
don’t have to buy big quantities of silver to become wealthy one day. For
people with limited resources, buy only with your extra money. Buy U.S. silver
eagles. Those will have big premiums when the U.S. Mint stops minting coins. Silver
purchases are to be held for the long run. The price of silver should go
higher forever, with only some periods of rest. None of you can grasp
intellectually the future price of silver. Any price you think of will fall
short of the real price. What I say is true as long as they can’t
produce artificial silver.
The market will not
accommodate those who want to jump on the train when it really starts to
move. The price of silver will explode without warning. No computer or chart
will give a sign. The bullion banks, those who are short 400 million ounces
on the COMEX, and the miners won’t know when the avalanche will come. Your
silver will become like a winning lottery ticket. This wealth will come from
nowhere but reading articles by Ted Butler. You, the small investor, have
accumulated 200 million ounces of silver and you are going to be the last
resort for the silver users. Your willingness to sell will ultimately
determine the price.
(Investment Rarities does
not necessarily endorse these views, which may or may not prove to be
correct.)
WHAT IS RARITY?
By Theodore Butler
My friend Izzy asked me to submit the article above. I thank him
for his kind words and I would like to expand a bit on his article. For those
of you who may not know our history, I have known him for more than 25 years,
and he is responsible for initiating my intense interest in silver. As a
broker, I personally witnessed him buying silver in the $4 range and selling
it at $40 several years later. While no one is infallible, when it comes to
matters involving silver, Izzy is rarely wrong.
Over the years I have been
able to write about important topics like silver supply and demand, the
silver deficit, manipulation, metals leasing, the workings of the COMEX and
the Commitments of Traders Report (COT). It has been very rewarding to have
witnessed these topics become widely accepted by others and then written about.
But, I have to tell you, my strong sense is that
this rarity issue concerning silver is going to become the most significant
of them all.
When Izzy
sold his silver at near $40 per ounce, rarity wasn’t much of a factor. There
were other more pressing issues, like the runaway price, chaotic market
conditions, rule changes on the COMEX and the great silver scrap melt. I
lived through that era and never heard any mention of silver’s rarity. What
is rarity? In simple terms, it means that there isn’t very much of
something. Whether it is a rare painting, a type of gemstone, or a hard to
find antique, we know from experience that the more rare
an item, the more value it commands.
Gold is a rare material. It
has always been difficult and expensive to extract from the earth, and once
extracted, it has been prized and desired by mankind for 5000 years. At the
very core of gold’s value is its rarity and
the impossibility of a sudden increase in its quantity. When people talk
about gold being no one else’s liability, and how it can’t be
printed or created like paper or electronic money and that it is a store of
value, what they are really saying is that gold is rare and that rarity
can’t be changed suddenly.
Silver is rarer than gold.
Period. There is less silver in the world, above ground than there is gold. That
is easy to document. Since I have been harping on this point, no one has been
able to refute it. Remarkably, given the nature of how the world uses gold
and silver, silver is destined to become even rarer than gold in the future,
even though we take out of the earth’s crust 7.5 times as much silver
as we do gold. That’s because we use silver as an industrial commodity.
In most cases it can’t be recovered as scrap. On the other hand, we
treat gold as a luxury, a rare and expensive material. In virtually all its
uses, such as jewelry, it is recoverable.
Even though there are five
ounces of gold in the world now for every one ounce of silver, this 5 to 1
ratio will expand as newly mined gold is added to above ground supplies. Silver
inventories will continue to shrink. Since gold is close to $450 per ounce,
while silver is $7 per ounce, the profit possibilities are dramatic. However,
what makes silver such a stunning opportunity is not just that it is much
rarer than gold, or that the relative rarity grows
more dramatic daily, but the fact that this state of affairs is unknown to
the financial world. This unawareness is the big kicker.
How is it possible for
these facts to exist and go unrecognized in the financial world? People form
their opinion on the value of anything by first considering the current
price. It does not matter that value and price are two very different things.
It is human nature to conclude that the price is the best indicator of value.
At $450 gold and $7 silver, the world concludes that gold is rarer than
silver. If it were possible to poll every person on the face of our globe, I
would be shocked if even one out of a million would say that silver is rarer
than gold. There are more than 100 articles written about gold for every
article written about silver. Not one of those articles has ever indicated
that there is less silver in the world than gold. This should get your juices
flowing. It should drive you to buy silver.
It’s also rare when
you are given information and advice that can dramatically improve your
financial condition. Even rarer is when the information is given and received
before it becomes widely known. Silver is more rare than gold, and rarer
still is someone who knows this fact. You should act accordingly.
(This essay was written by
silver analyst Theodore Butler, an independent consultant. Investment
Rarities does not necessarily endorse these views, which may or may not prove
to be correct.)
Israel Friedman
www.investmentrarities.com
(No one can safely predict the future and
it’s possible that Israel
Friedman’s Butler’s
analysis will prove incorrect. Silver can go up, but silver can go down. It
is up to you to read, analyze, and arrive at your own conclusions. Prudence requires
we emphasize that precious metals may or may not prove to be suitable for
your consideration.)
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