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Trading Lessons

The Coming Silver Price Supernova

Commodities / Gold and Silver 2010 Jul 22, 2010 - 12:44 PM GMT

By: Lorimer_Wilson

Commodities

“Few investment opportunities arise in our lifetime like silver. The stage is set for a silver price percentage gain of extraordinary magnitude! Forget the popular refrain of “Got Gold?” and make some additions to your portfolio to take advantage of the coming silver supernova!"


So said Donald J. Poitras in an email he sent me after reading an updated version of a recent article by me about the possible impact the historical gold:silver ratio could have on the price of silver should gold go parabolic to various levels. With Poitras’ permission I present below, in a reformatted and edited version, his views on why he believes there are other sound reasons why silver, in and of its self, can expect to experience a “percentage gain of extraordinary magnitude” in the years to come. As Poitras sees it:
 
These Facts About Silver Say It All
 
a) Diminishing Supply: Increasing Demand
- Only 600 million ounces of silver are mined yearly yet industrial demand, with new uses being implemented every year, is currently over 900 million ounces per year.
- Investment demand for physical silver has exploded with the advent of silver ETFs and the increase in actual ownership of the physical metal by interested parties worldwide. China, for example, is now encouraging its citizens to own silver. Demand is such in the U.S. that he U.S. mint is rationing silver coins.
- Total known world above-ground silver inventories have declined by more than 98% in the past 75 years.
 
b) Massive Short Position Exists
- Silver has a massive short position, probably greater than any commodity in history. If one factors in short positions on COMEX and the leasing of silver by bullion banks, banks and brokers selling silver certificates and other silver instruments with no silver to back them  then it is quite possible that hundreds of millions – perhaps even billions – of ounces of silver are sold on paper that do not physically exist.
 
c) Inground Silver Is Limited and Will Become Much More Expensive to Mine
- The average occurrence of silver in igneous rock (igneous rock composes ~92.5% of the earth’s crust) is 0.07 PPM or 0.07grams of silver per metric ton of igneous rock, which means that on average 444.3 metric tons of igneous rock must be mined to obtain 1 troy oz of silver (1 metric ton/.07gram Ag)*(31.1gram/1troy oz)!
- Because of the geological phenomenon of epithermal deposition, very little silver remains underground.
- Only the recycling of silver-containing products, the mining of scarce surface silver veins and the silver by-product of base metal mining can provide fairly cheap silver.
- Silver is not found in placer deposits like gold but in veins and these silver veins are formed as epithermal depositions or condensation near the earth’s surface (like whipped cream on the surface of coffee). Simply put, the richest silver deposits are nearest the surface of the earth, and the deeper mines go, the less silver they tend to produce. Economically, the deeper the mine, the more expensive the silver is to obtain.
 
The Result: The Price of Silver Can Only Increase – Dramatically!
- As current silver is depleted from the abovementioned epithermal deposits and mined deeper at much lower grades (approaching 0.07 grams per metric ton), the costs of mining silver must skyrocket and consequently the price of silver must explode.
 
The stage is set for a silver price percentage gain of extraordinary magnitude! It is time to embrace the new refrain “Got silver?”

Lorimer Wilson is Editor of www.FinancialArticleSummariesToday.com (F.A.S.T.) and www.MunKnee.com (Money, Monnee, Munknee!) and an economic analyst and financial writer. He is also a frequent contributor to this site and can be reached at editor@munknee.com."

© 2010 Copyright Lorimer Wilson- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Lorimer Wilson Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Herb
23 Jul 10, 03:42
Silver Supernova

Why must writers insert misleading facts if their view is legitimate?

" The average occurrence of silver in igneous rock (igneous rock composes ~92.5% of the earth’s crust) is 0.07 PPM or 0.07grams of silver per metric ton of igneous rock, which means that on average 444.3 metric tons of igneous rock must be mined to obtain 1 troy oz of silver (1 metric ton/.07gram Ag)*(31.1gram/1troy oz)!"

First off the mining does not take place on that 92.5% of the earth, miners aren't that stupid, they mine where the ore is. A quick google search shows 2 to 6 ozs per ton is often obtained. Secondly about ¾ of all silver production is a byproduct of other mining activities most silver is found while mining copper. So this useless paragraph does nothing to support the writers case.

As for the massive short positions, I gotta believe that if they exist they are held by the whales, not the little investors like us. Since when do the big guys in control lose everything and the little guy makes out like a bandit? It doesn't work like that, never has never will. So if anything I am going with the theory that silver drops to maybe 6 bucks the whales make out good, the little guys get nervous and bail and then the real feast begins.

This story gets a D-, go back and try again.

Herb


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