Tracking the Re-Monetization of Silver

[webmaster]

Subject:Tracking the Re-Monetization of Silver
By: Vincent Bressler

Overview: Silver has been thoroughly de-monetized. The best way to observe this phenomenon is by looking at the above ground stock of silver. Many words have been written on this subject over the last ten years by Ted Butler and others. Let me simply state that that there is very little above ground silver left in the world, perhaps less than 1% of what there used to be.

Link: http://news.silverseek.com/SilverSeek/1212414200.php

[uranian]

the gold and silver prices move almost identically on a daily basis, according to kitco's charts. that suggests that whatever is driving gold demand is equally driving silver demand, put another way, silver functions primarily as a monetary metal.

[NNZ]

Ted Butler is plain wrong with his assumption that there are only 1 billion ounces of silver left above ground. That is because he is plain wrong with another assumption, namely that all industrial used silver will never be recycled.

The Silver Book estimates that the silver supply above ground is more than 20 billion ounces and they have far better arguments than "my old friend Izzy says..." :lol:

http://www.virtualmetals.co.uk/pdf/T...UNE%202007.pdf



I am a silver investor for almost five years and so far I'm satisfied with my investment. Of course I didn't follow Butlers advice to buy physical silver and rather bought leveraged paper silver. I was honestly convinced that re-monetization was very far away and mainly focused on investors demand from Europe and Asia and on inflation figures. But now I have to admit that the subprime crisis has brought us to the edge of re-monetization with lightning speed. Fortunately there is already enough silver so that it can become money again. Very fortunately the price of silver has to double again so that significant amounts of jewelry and silverware will be smelted into bullion silver. We'll see that in the not to far future.

Although Butler makes these false assumptions he has quite a talent to spread the word about silver. I hope he will jump on the re-monetization bandwagon and then he will finally see how his dream of a significantly rising silver price comes true. Of course THEN you ought to own physical silver and not paper. I think the time to switch from leveraged silver investments to coins and bars has come.

[Richard]

Originally Posted by NNZ

Ted Butler is plain wrong with his assumption that there are only 1 billion ounces of silver left above ground.

I must have missed something... Where does it say 20+ billion ounces in that report? Not to butt heads with you, I'm just not seeing it. I totalled up the 2001-07 supply totals and still only came up with around 7 billion ounces.

Even so, 20 billion ounces would make the gold/silver ratio ~ 1:4. Not bad!

[NNZ]

Hi Richard

you find the number on page 7:


Should this come as a surprise?
Not at all. With kind assistance from Tim Green, we have computed the total
amount of silver we believe has been mined over time. Going back to the
eleventh century, we estimate that this figure totals 1.17 million tonnes (Mt) of which the great majority was in the last 100 years.

Given the relative value of silver and gold, we assume that losses of silver stocks are far greater than those of gold. If one accepts that at least 40% of the silver mined has over the years been lost, then above-ground stocks today can be estimated to amount to 700,000 tonnes of metal. A good deal of this metal has been recycled many times over.

Because I know that many americans have their problems with the decimal system I have converted the 700,000 tonnes into ounces (22,5 billion) and then downsized the number to 20 billion to get an amount that is easy to remember.

Even so, 20 billion ounces would make the gold/silver ratio ~ 1:4. Not bad!

Of course it's not bad! Silver is way undervalued. It's just that Butler is looking into the wrong direction. Silver will never rise because of the industrial demand. There will never be a shortage in silver caused by industrial demand. There is abundant silver available for industrial demand. The trigger is investor demand and inflation. So people shouldn't wait for demand from the RFID industrie or bet on wood preservation or what else fairy tales Butler is telling them. Better look at the ETFs. Tom Szabo from www.silveraxis.comis always worth reading, he has understood the story.

[Richard]

Originally Posted by NNZ

Hi Richard... you find the number on page 7:

Thanks. Yes indeed... 22.5 billion ounces

It's just that Butler is looking into the wrong direction. Silver will never rise because of the industrial demand. There will never be a shortage in silver caused by industrial demand. There is abundant silver available for industrial demand. The trigger is investor demand and inflation.

Lol (shakes my head)... Are you sure you two disagree?!

Because I don't see that Mr Butler is saying or implying that indusrial demand will raise the price. At least, I don't walk away with that lesson in mind after reading one of his articles. Nor for that matter that what you and your sources (btw, thanks for the link) are conflicting with what I think he and the other silver promoters are saying.

With industrial demand being met with a good amount of recycled silver, that leaves (relatively) little for investment. With the short-selling dealing in amounts that simply do no exist (at least 90 billion oz), wheather we go off 1 billion or 20 billion, then it would seem Mr Butler is only pointing out that more buying by investors would turn the tide on the price. Likewise, so are you saying...

So people shouldn't wait for demand from the RFID industrie or bet on wood preservation or what else fairy tales Butler is telling them. Better look at the ETFs.

Exactly. You're both right and pointing to the same thing

I admit, though, that I don't read and follow Mr Butler's work as well I do the others (Hommel, Morgan, and Weir). So maybe I'm getting the "wrong" point or the point "wrong" in his articles. Whatever the case, I see a maniuplated price that's making silver dirt cheap as do most if not all of us here. Still, I appreciate your presenting the more accurate supply of silver in the world. I hadn't been able to find that, even after all the time spent looking for it. Btw, been in this since March, after the first major dip.

But I doubt that the 20+ billion will matter much, though, and imv a much lower ratio to gold is very possible. I think it's inevitable, really.

I mean, let's be real here... Industrial use is just that, not available investor/monetary supply, so they won't be throwing much towards that use. If they did, we'd just be selling it right back to them. So less silver will be available as investment and/or money, so we should expect well into the future for a g/s ratio lower than, if not in excess of, 1:4. Myself, I'm hoping for 1:5 at least, favoring silver.

Which is, I beleive, what you're saying here, correct? I'm just a bit confused though because you stand by the 20 billion figure, as if to say (imv) that silver will never reach such peaks as we all hope because there's just too dog-goned much of it.

[JesterJay]

So, some guy named Tim Green says so, so it's true!? Well, I am convinced.
Ted "All In" Butler has been involved with silver for decades and you think he knows nothing about the numbers he is using. Ridiculous. Especially to argue the point so insistantly when you and he are saying the SAME DANG THING!

Sorry for shouting.

But here in America 3/5 of half the people have a hundredth of a percent of an idea about silver. And that's not too many of us neither. (math...Now my head hurts)

So to sum it all up:
Buy silver, it's gonna be big someday.

Got it,
JesterJay

Originally Posted by NNZ

Hi Richard

you find the number on page 7:


Should this come as a surprise?
Not at all. With kind assistance from Tim Green, we have computed the total
amount of silver we believe has been mined over time. Going back to the
eleventh century, we estimate that this figure totals 1.17 million tonnes (Mt) of which the great majority was in the last 100 years.

Given the relative value of silver and gold, we assume that losses of silver stocks are far greater than those of gold. If one accepts that at least 40% of the silver mined has over the years been lost, then above-ground stocks today can be estimated to amount to 700,000 tonnes of metal. A good deal of this metal has been recycled many times over.

Because I know that many americans have their problems with the decimal system I have converted the 700,000 tonnes into ounces (22,5 billion) and then downsized the number to 20 billion to get an amount that is easy to remember.



Of course it's not bad! Silver is way undervalued. It's just that Butler is looking into the wrong direction. Silver will never rise because of the industrial demand. There will never be a shortage in silver caused by industrial demand. There is abundant silver available for industrial demand. The trigger is investor demand and inflation. So people shouldn't wait for demand from the RFID industrie or bet on wood preservation or what else fairy tales Butler is telling them. Better look at the ETFs. Tom Szabo from www.silveraxis.comis always worth reading, he has understood the story.

[NNZ]

Hi Richard,

you wrote:

Originally Posted by Richard

With industrial demand being met with a good amount of recycled silver, that leaves (relatively) little for investment. With the short-selling dealing in amounts that simply do no exist (at least 90 billion oz), wheather we go off 1 billion or 20 billion, then it would seem Mr Butler is only pointing out that more buying by investors would turn the tide on the price. Likewise, so are you saying...:

Okay, if there were a short-positon as big as 90 billion oz than even I would pay attention. Here's a quote from Ted "Nymex is Crimex" Butler:

Butler: OK. For the COT of 5/25/04, the eight largest traders were net short 180 million ounces of silver futures. At the recent extreme on 3/11/08 they held more than 400 million ounces short.

You see the difference? When I claim that there are only 1 billion ounces of silver left, then a short position of several 100 millions is relevant. But since there are 20 billion ounces out there the whole CFTC mumbo-jumbo is ridiculous. Okay, companies like Barrick and Apex run large short positions. Look at the chart of SIL and you see how stupid Apex has acted. I always wonder why Soros hasn't sacked the Apex management a long time ago. With the new Bolivian mining tax Apex won't have fun with San Cristobal as long as they haven't covered their short position. Soros better should take a look at Apogee Minerals.

Originally Posted by Richard

Which is, I beleive, what you're saying here, correct? I'm just a bit confused though because you stand by the 20 billion figure, as if to say (imv) that silver will never reach such peaks as we all hope because there's just too dog-goned much of it.

That's partly right. I don't think that silver will skyrocket due to a short-squeeze. Silver will rise step-by-step to 50 or maybe even 100. Gold/Silver-Ratio might go to 30, but I don't think that I will see the old ratio of 15 again. That's because gold and silver will not become OFFICIAL money again. But more and more people won't trust the paper money anymore and will turn to precious metals. I'm 46 and during my lifetime I expect to see a gradual process of re-monetization of precious metals in the thoughts of the people. I don't expect to see the end of the paper money dynasty.

[Richard]

Originally Posted by NNZ

Okay, if there were a short-positon as big as 90 billion oz than even I would pay attention.

Sorry, I misquoted Butler from this article by David Morgan...

http://www.silver-investor.com/david...ipulation.html

For the sake of saying, and for your convenience, here is what I was refering to...

My point is simple: If the true sale of physical silver is done in an unregulated market based upon private contracts, then what is the purpose of the futures market?

Why did the London Bullion Management Association trade nearly 30 billion ounces of silver last year?

Why did the futures and options exchanges trade almost 60 billion ounces of silver last year?

Let’s get a bit real here. If the total silver supply is roughly one billion ounces and we can measure NINETY times that amount being “traded” on the reporting exchanges, does it not beg the question why?

I honestly don't know what it is. Call it x. The point is, there is more "silver" on the table than there is actuall silver. Wheather this means as much or not to the total silver supply...

You see the difference? When I claim that there are only 1 billion ounces of silver left, then a short position of several 100 millions is relevant. But since there are 20 billion ounces out there the whole CFTC mumbo-jumbo is ridiculous.

Yes, I see the difference. He says it's paper silver tanking investment value, while you say it's real silver tanking investment value.

And in each case there is a similarity... Both of you think IT, investment value, will rise if something is done about poor ol' bullion value being hammered by a mountain of industrial ounces or imaginary paper ounces. Which is of course true in both cases, because neither paper silver supply/demand nor industrial supply/demand is investment supply/demand.

To use a poor analogy, does the total amount of paper in the world determine how bad fiat-created debt is? Of course not, because if it did then paper towels and such would be at least partly responsible for all the debt! So we must seperate debt-causing paper from non-debt causing paper. By the same token, we must seperate the various supplies of silver and "silver".

So until any portion of that industrial supply decides to become INVESTMENT supply, we need not consider it as part of the value of investment ounces, just as we need not consider ETF ounces to be real until they're acutally in existence as real silver ounces. That means that the less than a billion ounces that Mr Butler and other sources refer to, including the link you first provided, is true: less than one billion ounces of silver has been available to investors, not 22.5 billion. And while it's mathmatically conceiveable that all that silver can come rushing in begging to be made into bullion... there's no reason to think that this will happen.

Having said that, let's look at your uh... optimisim... about the gold/silver ratio! As long as you want to count industrial supply as available to investment, then I guess it never will reach back to 1:15, much less better than that. But the total supply is not available for investment, so the ratio is already quite a bit better than 1:15. You'd make a better case saying most of the gold supply was available to invest in, but that just isn't so with silver.

This is an older graph from the 90's, and it shows the percetage of avaialable investor gold as well above half of the then supply. It probably hasn't changed by much since then... http://www.fgmr.com/gold.htm

And this is a link to the World Gold Council's FAQ... Questions 37 and 39 tell how much gold is in the world today
http://www.gold.org/faq/start/25

Let's say half of the lower supply number (145,000 tonnes) was tied up in other things besides being gold coins, bars, and jewelry. That would be in the ballpark of 2 billion gold ounces (72,500 tonnes), readily available as investment/monetary use vs the less than a billion silver investment/monetary ounces available today.So already, the investment gold/silver supply is at a ratio of at least 2:1, favoring silver. And since gold supply grows, by a small amount that it does every year, true, but grows nonetheless as industrial demand continues to rise for silver...

I wouldn't be so pesimist that the ratios will never be better than 1:30 in your lifetime because we're already well past 1:15!

[pkrebaum]

If 20 billion ounces of silver does exist, is mostly exists as fabricated silver, e.g. jewelry. There's a lot of "value added" in the form of the silversmith's labor. So if you look at your retail cost for a silver bracelet, silver would have to go above about $100/Oz. to make it profitable to sell that silver bracelet for scrap.

Even though bullion-backed funds can quickly create demand, they can also quickly create a surplus if fund managers decide to sell. Being the business types that they are, we have seen that they can be easily spooked (i.e. manipulated by the Cartels), at least with gold. I wouldn't doubt that the Fed and Central Banks hold major bullion positions within these funds.... more so probably with gold, but I'll bet they're increasing their share in silver as the spector of re-monetization comes closer. Thus, I view these easily traded (electronically liquid) forms of bullion as a source of market volatility which can only wreak havoc on us holders of physical metal.

A grassroots effort to get all Americans to hold a small amount of physical silver could break the Cartel's back. I figure it would take about another 300 MOz. of silver (physical metal) purchases to get silver to break $50/Oz. Unfortunately, getting 100 million Americans to each purchase 3 Oz. of silver would require that the 600 or so members of this forum each contact about 160,000 people.
*******************

Between now and 2010 will be the "golden age" (no pun intended) for us silver bugs. After 2010 supply will outstrip demand and the ONLY thing propping up the price of silver will be investment demand, unless there is a massive social meltdown and we all start using silver as money. I shouldn't have to add that investment demand is an unstable, unsustainable condition, a bubble if you will.

If anyone doubts the 2010 theory above I'd encourage you to review the production & demand data:

http://www.silverinstitute.org/supply/production.php

http://www.silverinstitute.org/supply/index.php

Total fabrication demand is only growing at 1% - 2% a year while mine production is growing at 4%. If it weren't for the current invesment demand of about 70 MOz. the price of silver would be about $10/Oz.

Most notable is the 11% growth in output of the primary silver mines.
These folks live just to mine silver and contribute 130 MOz. to annual mine output. Unlike the secondary mines their production rate can be ramped up rapidly....if you read the mining websites you'll see that many have made 25% increases over the last year alone, with more to come.

So unless the unthinkable worldwide financial / social meltdown occurs this would be my advice:
Wait for silver to get to $50 - $100 / Oz., then sell it all and get out before 2010. I hate to be such a bummer to 'yall here, but the silver at $4000/Oz. thing just ain't gonna happen.
Maybe a four-hundred dollar peak, but good luck catching it.... just make sure you get your money back from your bullion dealer in cash because 24 hours later, after the crash, he's going to be broke and his checks will be worthless.