27 Mar US Silver Production Lowest In 70 Years
Silver production in the US has been declining for years. The most recent data however, shows some alarming facts. US silver production for 2018 has just dropped to the lowest level in 70 years. The main reason for this is falling ore grades and mine economics. Take a look at the graph below courtesy SRSrocco report.
It is also interesting to note that the gold/silver ratio is currently at 85. This means that for every ounce of gold you can buy 85 ounces of silver. Traditionally this ratio should be around 50 and has been used by precious metal traders for the last 100 years to decide which metal will perform best. The current ratio of 85 means silver is vastly undervalued and should be bought to achieve the best return on capital going forward. Silver of course has a much wider use in industry than gold. Precious metal prices are basically controlled by the paper trade ( derivatives ) on a daily basis. Currently the paper trade in gold is about 255 oz of paper gold to every one oz of real gold. Silver on the other hand is trading at a much higher ratio of 557 paper ounces to one ounce of silver. The implication for investors is that the silver price will expand much more rapidly than that of gold.
Gold and Silver Investment since 2008
Very few investors are aware of the vast investment in gold and silver since the 2008 market crash. Savvy investors learnt the lesson of safe haven assets and have been taking steps to bullet proof their wealth as can be seen from the below graph. Safe haven investment took off after the 2008 market crash.
It is time for us to take maximum precaution against the insane advance in the US markets that cannot be sustained for much longer. Last Friday the Dow Jones dropped nearly 600 points before recovering towards the end of trade. This sell off was due to investors getting worried that the earnings of the shares are disappearing fast as I have stated in previous articles. The current trickle of money flowing into precious metals will turn to an avalanche once the markets start to drop seriously. This will cause huge price movements to the upside.
The only thing holding up the stock markets at the moment is central bank intervention via the printing of more money to channel to the stock markets. Every day the geopolitical pressure are rising in North Korea, Venezuela, the middle East and then there is the Brexit disaster. All these factors are pushing the risk of a stock market collapse higher everyday.
In conclusion we must realize that we are in unknown financial and economic territory. Investment principles that has worked for years might not be working during the coming financial crisis.