A lot of investors simply assume that just because silver is cheaper than gold it should more abundant too. That is not entirely true. The fact is the amount of silver is less than the amount of gold available in the world. There aren’t tons of silver stockpiled somewhere and overlooking this could jolt the price of silver unexpectedly and put it on a different asset level.
It would seem that the silver price has a hard time going up but some analysts believe that this precious metal is undervalued. They peg it at $50 to $100 and ounce but if we are to really believe that this precious metal is undervalued compared to gold then even $100 is a timid value.
Silver mining has increased significantly over the last 20 years
Countries like Mexico,Peru and Australia have doubled their silver output since 1990. Even china has scaled up its silver production from 10 million ounces in 1991 to more than 100 million ounces in two decades. In all, the global silver mine production grew from 400 million ounces to 700 million ounces. Despite the increase in production, the demand for silver is still outpacing global production.
Contrary to popular belief, there is no abundance of silver. Silver production has never really been able to meet the global supply in over a decade. The silver mines are producing enough to meet the growing demand. For instance in 2010, the global demand for silver was over 1 billion ounces global mining could only provide 700 million ounces. This means that silver will always be valuable and why people should still buy silver bullion.
How has the deficit been filled
Besides silver mined, some governments have stockpiled silver to sell it off for industrial use. The U.S government has sold off 5 billion ounces of its own silver since World War II. Governments buy silver because they use it to mint currency coins but over the years their stockpiles have been falling drastically.
The silver market has a few other places to saw the raw metal from. One other option is the scrap metal market. However, this market is small and it could create real problems if it runs dry.
Silver is rare
A lot of people don’t know how rare silver is. It is because of its rarity that silver is considered a precious metal and why you should buy silver bullion as a hedge. Little known fact: there is 17.5 times more silver than gold in the earth’s crust. However, the amount of gold that’s above ground exceeds the amount of silver that is above ground.
Silver is 17.5 times more abundant in the earth’s crust than gold. There is more gold above ground than there is silver. This is why now would be a good time to buy silver bullion as an investment.