By James Cook
A client who happens to have a $32 million profit in silver sent me an interesting set of facts. He titled his study, “Which Would You Pay $1,000 An Ounce For?” He points out that silver inventory held above ground totals 1 billion 400 million ounces. Annual industrial use of silver is 900 million ounces. Meanwhile, gold inventory above ground is 3 billion ounces while industrial use is only 20 million ounces. Forty-five times more silver is used each year than gold.
That means the years of inventory remaining are amazingly different. A year and a half supply of silver exists while one-hundred and fifty years of gold supply remains. Here’s another shocker. In 2010, silver usage, year over year, was up 18% while gold was down 40%.
Sometimes it’s hard to fathom all the bullish aspects credited to silver. You have a rare metal used in so many important industrial applications as to be termed miraculous. The world supply of this cherished metal has been consumed. The billions of ounces mined over 2,000 years are gone forever. The disappearance of this hoard should have sent the price to much higher levels. It didn’t. This caused the world’s foremost silver expert Theodore Butler to track down the reason. The oversized short position he discovered in silver added an even more bullish element.
Now we are apparently on the edge of a serious silver shortage at the same time investment demand for silver has reached record levels. There’s more. Most silver is extracted as a byproduct of base metal mining. Primary mining is growing but this takes time and money. Increases in supply will be slow in coming. In addition, silver is used in tiny amounts in its multitude of applications. This makes much of its usage insensitive to price. Industrial users must have it and this demand will not diminish as prices rise. Furthermore, the low price for so many years has eliminated research on substitutes for silver.
Silver was money for thousands of years because it was a store of value, a unit of account and a medium of exchange that people wanted because of its beauty, imperviousness to the elements and divisibility. Today there isn’t enough silver left to act as money in even the smallest country.
Finally, the seemingly endless series of government created financial crises beg for ownership of valuable tangible assets. Silver has an historical record of protecting against inflation and deflation. A case can be made that silver is the ultimate asset for profit and protection.
Here’s what you should buy now: 100-ounce bars of .999 pure silver. They can be easily stacked in a corner or in a safe. They have a bright shiny finish and are always liquid. We also have 10-ounce bars. They are small, portable and highly reflective. These beautiful 10-ounce bars are another great way to own silver. U.S. Silver Eagles are easily the most popular silver coin in the world. Each is one-ounce of pure silver, and they have been struck
by the U.S. Mint since 1986. The 2011 Silver Eagle is now available. You can own a box of 500 fresh-from-the mint coins dated 2011 or you can own a complete date set. That’s one roll for each of the past 26 years. There’s also a Twenty-First Century set that starts with the year 2000 and continues with one roll for each of the following twelve years.
We also recommend U.S. silver coins struck in 1964 and earlier. You get 10,000 dimes, or 4,000 quarters or 2,000 half dollars in a $1,000 face value bag. These are 90% fine silver Roosevelt dimes, Washington quarters or Franklin and Kennedy half dollars. For a bit more money you can get the scarce brilliant uncirculated examples that have never been in circulation. They are as bright and shiny as the day they came out of the mint. Our first pick would be Kennedy half dollars (circulated or uncirculated). They are bright bold coins recognized everywhere.
If you want to store your silver, 1,000-ounce silver bars are a good way to go. These 70 pound bars are stored at Brinks. They stand behind the security of the bars. You get a storage agreement in your name and the serial number of your bar. Nobody can match this storage arrangement. (Other storage programs are in the dealer’s name and don’t give you serial numbers.) This is a good way to own real silver with the safest possible storage program.