Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

The Uneconomic Return of Scrap Precious Metals and Hyperinflation

Commodities / Gold and Silver 2013 Aug 02, 2013 - 02:04 PM GMT

By: Dr_Jeff_Lewis

Commodities

One argument against silver's return to acknowledged monetary status has been that because much of the above ground silver has already been used up by industry, there simply is not enough supply to flow around in the economy, which is a primary requirement of a suitable currency.


Supporting the inadequate flow argument is the fact that all the silver now above ground would have a difficult time returning to market because it costs money to refine, assay, and produce investment grade bars for futures contract delivery or storage. Obviously, higher prices would make recovering silver from scrap sources much more economical, and if the price is right, the economics will be the driver.

Another argument is that in some recent cases of modern hyperinflation, silver did not become the currency of choice. Dollarization was a large factor, but nevertheless, silver was readily received in unofficial gray markets for payment, as well as scrap gold.

The Mechanism from Cash for Gold (and Silver) to Good Delivery Bars

According to an industry professional, precious metals are recovered either from mine output or scrap jewelry and other products, such as bars and coins, at a refinery. The refiner then produces good-for-delivery investment grade bars to the standard and specification of the futures exchange, in this case the CME Group.

The bars belong either to the refiners themselves, meaning they have bought and own the metals, or they belong to the refiner's customers, who bought and owned the metal at the refinery, hiring the refiner to make the metal into saleable bars.

The bars must then be registered under an acceptable brand, such as Heraeus, Johnson Matthey or Metalor Technologies, to name a few.

Once these bars are produced, the metal must then be transported to the warehouse by exchange-approved carriers such as Brinks Inc., Via Mat International or IBI Armored Inc. There is no other way for the precious metals to get onto the exchange.

Metal may subsequently move between Comex-approved warehouses, such as those operated by HSBC Bank, Brinks Inc. and Scotia Mocatta Depository. Nevertheless, any moves made between these warehouses must be made using the same approved carriers. No metal can enter the marketplace from outside of this refining loop.

Recycling is Not Easy, But Inflation Makes it More Attractive

Basically, recycling precious metals is not a super easy and cost free mechanism - regardless of what form the scrap originates from or what metal is involved. One possible solution would be to cut out the middle man and allow local banks to manage the assay and collateralization of the precious metals. Anything outside of this would be an unregulated gray market.

Inflation — and especially its most dramatic form of hyperinflation — will make precious metal recycling that much more attractive. Most people assume that hyperinflation will come suddenly, rather than over time. Still, it is happening now, just slowly and a bit more every day, as every major central bank is devaluing simultaneously. And all major western economies face huge debt to GDP ratios alongside deficits approaching the crucial 40-50% of all government spending.

An entire industry could be grown for facilitating the transfer of scrap precious metal into bars. A new army of recyclers would certainly make a dent in increasing the investment grade supply of precious metals and new techniques could emerge.

All durable commodities will be recycled, but precious metals can and will still act as stores of wealth and be made into collateral for final payment due their relative scarcity. As their value naturally rises in paper currency terms, substitutes will be found for their industrial uses.

For more articles like this, and/or for a breath of fresh silver market reality amidst the stench of denial and technically meaningless short term price obsessed madness, check out http://www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2013 Dr. Jeff Lewis- 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.

Dr. Jeff Lewis Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules