In Ted Butler's Archive


By Israel Friedman

It’s hard to write an interesting article on silver, because Ted Butler has covered almost everything about silver. But, I am excited about something he touched on recently, because it is something I think about often. I mean the rarity of silver in the future. We know that, over the past 50 years, the stockpile of silver and the reserves of silver in the ground are both shrinking.

We also know that of the billions of ounces mined over the past 5,000 years, we only have 5% or 10% of it left. And based on government statistics, the reserves of silver still in the ground will only last for 20 to 30 more years. Today silver may not fall onto the rare category, but in the future it will have to. I see a lot more industrial demand for silver in the next 20 years than there is today. Because of world population growth and tremendous economic growth in China and India, silver will be in much greater demand as those people strive to improve their standard of living. If the reserve figures are close to correct, at some point depletion will take its toll on production, and production will decline. Superimpose that on increased demand and it means a major shortage of silver.

When Van Gogh and others made their paintings they could not get enough money to buy a good meal. Some died poor. Very few art buyers realized the future value in those paintings. They saw a starving artist whose paintings were dirt-cheap and who was begging people to buy them. There were few takers. You look at silver and see the $7 price, you hear this talk of rarity and you ask yourself why only Ted Butler and Izzy, and maybe a few others, see the big picture in silver?

The answer is simple. Most of the people don’t invest in value. They invest mostly based on charts, computer programs and what the price tells them to do. The old fashioned way of seeking value isn’t used that much anymore.

Ask yourself these questions:

1. Will silver become a rare item in the future? My answer is yes.

2. Is silver rarer than gold now? The answer is yes.

3. Are the silver prices controlled? My answer is yes.

4. Are only a few people aware of the silver story? Yes

When most of the people in the world answer yes to these questions and recognize the true rarity of silver, and then want to own it, the price will be in the hundreds of dollars.

You have to ask yourself why you can buy silver for $7 and gold goes for $450? The answer – the bullion trading banks have gold to sell and no silver, so they push gold to the public and don’t let silver prices rise so not to bring demand by investors, because that will increase the deficit. The tables will turn one day and those who are naked short silver will have to go into bankruptcy. There’s no other way out. All the silver in the world won’t be enough to bail out the shorts, only bankruptcy will.

In my opinion, you don’t have to buy big quantities of silver to become wealthy one day. For people with limited resources, buy only with your extra money. Buy U.S. silver eagles. Those will have big premiums when the U.S. Mint stops minting coins. Silver purchases are to be held for the long run. The price of silver should go higher forever, with only some periods of rest. None of you can grasp intellectually the future price of silver. Any price you think of will fall short of the real price. What I say is true as long as they can’t produce artificial silver.

The market will not accommodate those who want to jump on the train when it really starts to move. The price of silver will explode without warning. No computer or chart will give a sign. The bullion banks, those who are short 400 million ounces on the COMEX, and the miners won’t know when the avalanche will come. Your silver will become like a winning lottery ticket. This wealth will come from nowhere but reading articles by Ted Butler. You, the small investor, have accumulated 200 million ounces of silver and you are going to be the last resort for the silver users. Your willingness to sell will ultimately determine the price.

(Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)


By Theodore Butler

My friend Izzy asked me to submit the article above. I thank him for his kind words and I would like to expand a bit on his article. For those of you who may not know our history, I have known him for more than 25 years, and he is responsible for initiating my intense interest in silver. As a broker, I personally witnessed him buying silver in the $4 range and selling it at $40 several years later. While no one is infallible, when it comes to matters involving silver, Izzy is rarely wrong.

Over the years I have been able to write about important topics like silver supply and demand, the silver deficit, manipulation, metals leasing, the workings of the COMEX and the Commitments of Traders Report (COT). It has been very rewarding to have witnessed these topics become widely accepted by others and then written about. But, I have to tell you, my strong sense is that this rarity issue concerning silver is going to become the most significant of them all.

When Izzy sold his silver at near $40 per ounce, rarity wasn’t much of a factor. There were other more pressing issues, like the runaway price, chaotic market conditions, rule changes on the COMEX and the great silver scrap melt. I lived through that era and never heard any mention of silver’s rarity. What is rarity? In simple terms, it means that there isn’t very much of something. Whether it is a rare painting, a type of gemstone, or a hard to find antique, we know from experience that the more rare an item, the more value it commands.

Gold is a rare material. It has always been difficult and expensive to extract from the earth, and once extracted, it has been prized and desired by mankind for 5000 years. At the very core of gold’s value is its rarity and the impossibility of a sudden increase in its quantity. When people talk about gold being no one else’s liability, and how it can’t be printed or created like paper or electronic money and that it is a store of value, what they are really saying is that gold is rare and that rarity can’t be changed suddenly.

Silver is rarer than gold. Period. There is less silver in the world, above ground than there is gold. That is easy to document. Since I have been harping on this point, no one has been able to refute it. Remarkably, given the nature of how the world uses gold and silver, silver is destined to become even rarer than gold in the future, even though we take out of the earth’s crust 7.5 times as much silver as we do gold. That’s because we use silver as an industrial commodity. In most cases it can’t be recovered as scrap. On the other hand, we treat gold as a luxury, a rare and expensive material. In virtually all its uses, such as jewelry, it is recoverable.

Even though there are five ounces of gold in the world now for every one ounce of silver, this 5 to 1 ratio will expand as newly mined gold is added to above ground supplies. Silver inventories will continue to shrink. Since gold is close to $450 per ounce, while silver is $7 per ounce, the profit possibilities are dramatic. However, what makes silver such a stunning opportunity is not just that it is much rarer than gold, or that the relative rarity grows more dramatic daily, but the fact that this state of affairs is unknown to the financial world. This unawareness is the big kicker.

How is it possible for these facts to exist and go unrecognized in the financial world? People form their opinion on the value of anything by first considering the current price. It does not matter that value and price are two very different things. It is human nature to conclude that the price is the best indicator of value. At $450 gold and $7 silver, the world concludes that gold is rarer than silver. If it were possible to poll every person on the face of our globe, I would be shocked if even one out of a million would say that silver is rarer than gold. There are more than 100 articles written about gold for every article written about silver. Not one of those articles has ever indicated that there is less silver in the world than gold. This should get your juices flowing. It should drive you to buy silver.

It’s also rare when you are given information and advice that can dramatically improve your financial condition. Even rarer is when the information is given and received before it becomes widely known. Silver is more rare than gold, and rarer still is someone who knows this fact. You should act accordingly.

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

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