Lear Capital: Silver Supply Critically Low – Only $4 Worth Left Per Person

2010_01_05_17_53_260001Have you noticed that ne’er a word is ever heard about silver on your favorite financial channel or in market publications and newspapers?  Gold seems to get all the attention, mostly when the price is going down.  It’s as though, there is a fear of the news getting out.  What news?  Let’s see!

The truth be told, Silver has become so important to industry, that without it, major world industries would shut down.  Silver is used so extensively in industry, that many of our products today, simply could not be made without it.  The list is extensive.  Cell phones, computers, televisions, solar panels, even cars.  That’s just for starters.

In medicine, Silver’s use is widespread as it has qualities unique even to gold.  Did you know silver is a germ killer?  Through the middle ages, the wealthy had eating utensils and drinking cups made from silver as a means to keep them sterile.  Continued use of such utensils caused the users skin to take on a bluish tint, a condition which symbolized wealth.  Hence, the coining of the term “Blue Bloods” and the phrase “born with a silver spoon in his mouth.”  Settlers were also said to have dropped a silver coin in barrels of water carried in their travels to keep the water fresh.

In today’s medicine, it is used in ointments to care for burn victims, bandages to stave off infection and clothing to kill odor causing bacteria.  Some people even drink it to detoxify their whole body.  Indeed, without silver, the medical industry would be hard pressed to find a substitute.

Its military use is vast.  Think of the electronics on ships, in planes, tanks, communications and on and on.  A most interesting fact to me – although I do not have top secret clearance to verify this – is that there is a reported 30 pounds of silver in a cruise missile.  Try to recycle that.

And then there is nano-silver.  One could go on for days about nano silver but for now, suffice it to say, without nano-silver UPS would be UPSIDE down.  Nano Silver Ink Technology is used to create billions of Radio Frequency Identification Tags (RFID) used for tracking your package from shipping point to destination.  I’m pretty sure you don’t recycle those either.  Get the message now?  You wouldn’t without silver.

It is all these uses that, according to John Embry, of Sprott Asset Management, has exhausted the world’s above-ground supply of silver.  As much as 95% of all silver ever mined is gone.  The rest is salted away in investor IRAs, depositories and safety deposit boxes.  Have you stashed your fair share?

That leaves annual silver production as the sole source for industry and investors alike.  According to the Silver Institute, about 1 billion ounces of silver are produced each year.  With 6 billion people in the civilized world, (give or take) that means there is less than 1/6th of an ounce of silver available at any time per person.  At $24 an ounce, that’s $4 worth.  Even that is stretching it as 75%, or more, of today’s production is currently used in industry.

One small blip up in investor demand and industry would be stranded.  Imagine, Warren Buffett repeating his 1997, 1998 purchase of 129.7 million ounces of physical silver.  That would buy up nearly every ounce of non-industrial silver produced in an entire year.

Understanding how fragile the world supply of silver really is, is to understand why the U.S. mint ran out of silver 3 times this year and why industry expert Eric Sprott says silver could go to $100 an ounce in the next 2 – 3 years.  Now, do you see why silver is rarely discussed in the media?  Anyone who knows anything about silver would let the cat out of the bag.  Silver is almost gone and as silver goes, so does world industry.

Each ounce of silver you buy today, represents the allocation available to 24 people when you consider industry has called dibs on 3 out of every 4 ounces produced.  When this news hits the media, its going to make the gas lines of the mid 70s look like the Express Lane at the supermarket.

If you want to keep tabs on silver supply and demand, follow me @DaveTheGoldDR.  If you don’t, I’ll be in line checking out with your silver.

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