Silver Supply

It is estimated that throughout human history approximately 1.5 million tonnes of silver have been mined able to fit into a 52-meter cube. Unlike gold, which is almost all entirely with us still today, most silver has been used and thrown away without being recycled. Expert sliver researchers state that 90% of all silver mined has been lost to landfills. In other words roughly 5 billion ounces of silver remain of which only roughly 2 billion troy ounces remain in bullion form (just over 4% of all time mined silver).

The world’s aboveground silver stock has tremendously fallen since the beginning of World War II. Back then it is estimated that the world had more than 10 billion ounces of fine silver bullion in its inventories (the U.S. government held roughly half of this massive silver stock). Thanks to immense industrial demand for silver over the past 70 years, governments now hold less than 8% of all identified silver bullion in the world.

In 2013 alone, just over one billion ounces of silver supply were made available to the world’s silver market (approximately 80% came from mining, 20% came from silver scrap recycling).

In a world financial market of nearly one quadrillion USD ($1,000,000,000,000,000.00), the following is a quick visual of why silver is a precious metal:

silver-production

Source: Visual Capitalist, slide 3 of 9

Today private investors hold an estimated 2 billion ounces of .999 fine investment grade silver. In other words, all the investment grade silver bullion in the world is less than 3X’s the size of the silver cube you see in the previous image.

Even though $40 billion USD for the world’s entire investment grade silver holdings may sound like a lot, it is a pittance given that the world has approximately $241 trillion USD in recorded assets (according the Credit Suisse’s 2013 Global Wealth Report) and a conservative estimated $32 trillion USD in unaccounted “offshore wealth”.

Silver’s global demand in 2013 totaled approximately $25 billion USD. Global gold demand was just over $200 billion USD in 2013 or 8X’s the dollar volume of the year’s silver market.

It is interesting to note that the all time estimated mined Gold-Silver ratio is about 8.8. This means that for every 8.8 ounces of silver mined we humans have mined up about 1 ounce of gold (based on the all time estimate of 1.5 billion tonnes of silver and 170,000 tonnes of gold mined).

For more than a century now, governments and central banks have been actively meddling in pricing the values for silver and gold, as a consequence the over 5000 year average gold to silver ratio of about 15 has, only in the last century or so, ballooned to a ratio of 100 at times.

gold-silver-ratio-historical

Source: MacroTrends.net

According to geologists, we find 0.075 parts per million (ppm) of silver vs. 0.004 ppm of gold which would give us a naturally occurring ratio of 18.75 but note that almost all silver mined today is done as a byproduct of other metal mining operations.

There are very few “silver only” mines and miners as silver can be one of the most difficult precious metals to recoup given its current low paper price in comparison to current energy costs. The physics of how silver ore bodies spread like veins throughout Earth’s crust also severely escalates the mining costs of escalating it all from the ground.

Thankfully buying the physical silver or gold bullion is still easy and convenient today, whereas the work required to dig ore on a large scale from the Earth, it looks like a rather difficult task which I want no first hand part of.

The next article in our Beginners’ Guide to Buying Physical Bullion will focus on bullion and how it differs from other asset classes.

» Bullion 101

All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.