Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Silver Commodity Quiz for 2011, Can You Pass?

Commodities / Gold and Silver 2011 Jun 03, 2011 - 02:40 PM GMT

By: Jeff_Clark

Commodities

Best Financial Markets Analysis ArticleJeff Clark, BIG GOLD writes: CPM Group recently released their 2011 Silver Yearbook, one of the industry's most comprehensive sources of information on the silver market. Though mostly a reference book, I uncovered some interesting facts that paint a decidedly bullish picture for the metal going forward.


If you're a silver investor, or are concerned about the recent selloff, you may find the following data very compelling. It provides an inside track on the market and will certainly make us all more knowledgeable investors.

For fun, I put what I read into the form of a quiz. See how many you can get correct...

1) The #1 driver for silver's price increase in 2010 was:

a) Investment demand

b) Fabrication demand

c) Lower supply

While both fabrication demand and supply rose last year, investors bought 142 million ounces of silver - the third highest level on record, and the highest since 1980. This pushed the price into record territory.

It's noteworthy that investment demand was higher last year than during the recession year of 2009. This suggests that investors buy silver more out of dollar devaluation and inflation fears than simply due to an economic contraction.

2) Silver mine production:

a) Exceeds demand

b) Matches demand

c) Falls short of demand

Silver produced from worldwide mining totaled 667 million ounces last year - but total demand hit 986 million ounces. Despite the fact that mine production has increased 33% since 1999, it falls far short of supplying the market's needs.

While scrap coming to market makes up the difference, this gap is one of the more critical issues going forward. The delicate balance between supply and demand will become increasingly precarious as overall demand continues to grow.

3) Household demand for silver (cutlery, flatware, and candlesticks) hasn't risen in ten years. Jewelry fabrication is up but a blip. Silver use in photography continues to fall. So, true or false?: Total demand is falling.

False. Industrial use has more than made up the difference from declines in other uses, and is pushing demand to new levels. Since 1999, consumption in electronics has increased 120%. Silver usage in solar panels began in 2000 and is up 640% since then. Silver was first used in biocides (antibacterial agents) in 2002 and, while a small niche, it has already grown sixfold. In fact, new uses for silver are being found almost every day, particularly in the biocide arena, making it increasingly difficult to catalog all its growing applications.

The Silver Institute forecasts that total industrial use of the metal will rise 36% over the next five years, to 666 million troy ounces annually. That's a lot of silver, meaning this portion of demand - which is roughly 60% of all fabrication - isn't letting up any time soon.

4) Silver represented what percent of global financial assets at the end of 2010?

a) 1.7%

b) 0.7%

c) 0.07%

d) 0.007%

D. In spite of last year's record-high prices, silver is, by any account, a miniscule portion of the world's wealth.

The ratio's high occurred in 1980, reaching 0.34% of financial assets. Silver as a percentage of global assets would have to grow over 48 times to match the record. It is true that many more paper assets exist today than 30 years ago, but the renaissance in silver will continue to increase its portion of worldwide assets.

5) The largest manufacturer of silver coins is the U.S. Mint, which sold 34.7 million ounces last year, about 46% of the world total. What country is the second largest?

a) Austria

b) Canada

c) U.K.

d) South Africa

The Austrian Mint contributed 15% of total silver coin sales last year (11.4 million ounces), an increase of 26% over 2009.

Still, the American Silver Eagle rules the global roost. Given how recognizable it is around the world, it's what to buy if you don't own enough metal.

6) Of the following groups of countries, which is increasing silver production and which is in decline?

a) Mexico, Australia, China, Argentina

b) Peru, U.S., Canada

Countries in group A are increasing production, while to the surprise of many, each one in group B is in decline.

This has direct ramifications for your silver stock investments. Total newly refined supply is expected to surpass one billion ounces for the first time in history this year, so make sure you have some exposure to countries where production is growing.

7) The average cash cost to produce an ounce of silver from primary silver mines is:

a) $7.16

b) $6.16

c) $5.16

d) $4.16

Of the 30 primary silver mines in the world, average cash cost rang in at $5.16 per ounce (net of byproduct credits). This is almost double 2002 levels. The silver price has risen 650% in the same time frame, however, so margins have risen in spite of higher costs.

8) The only governments that hold silver in inventory are the U.S., Mexico, and India. How many combined ounces do they hold?

a) 55 million

b) 155 million

c) 255 million

d) 355 million

Only 55 million ounces are estimated to be stored in these three countries. This equals only 5.6% of annual global demand. Governments held approximately 355 million ounces in 1970, but this has diminished largely due to the U.S. decision to stop using silver in its currency in the 1960s and other governments following suit.

No other countries are believed to hold any silver in inventory. Mine production and scrap supply had better keep up, because there is no backup source.

9) China accounts for how much of worldwide mine production?

a) 9%

b) 11%

c) 14%

d) 16%

Chinese mine supply totaled 102.7 million ounces last year, 16% of global production. China is the third largest silver producer, behind Mexico and Peru.

Mine production in China has more than doubled just since 2000, largely due to Beijing's decision to deregulate the state-controlled market the year before. This trend is certain to continue, due to rising silver prices and the fact that many parts of the country are underexplored. If you don't own a Chinese silver producer, you're missing out on some of the most explosive growth around the globe.

10) What is the weakest month of the year for the silver price?

a) January

b) June

c) July

d) October

Summer is usually the most sluggish time of the year for silver, and July is historically the weakest. Got your dealer's number handy?

It's clear that the forces underpinning the silver bull market aren't going away any time soon. Demand is high, but it's not an anomaly when viewed through an historical lens. Silver has been used as money for over 3,000 years, and the word for "money" in many languages is "silver."

Meanwhile, our current monetary issues are far from over, won't be easily resolved, and will take years to play out. Precious metals are proven forms of protection for this environment. Silver, along with gold, is your best defense against unsustainable fiscal imbalances and massive currency debasement, and will be a profit center for years to come.

Learn everything you need to know about silver – when to buy, what to buy, and how the silver bullion squeeze could affect the market. Read it now… in the free 2011 Silver Investing Guide.

© 2011 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in