Silver Paper To Physical Ratio Predicts Price Explosion

For many years, as most of you know, have I been preaching the gospel about owning physical silver. For those of you who have bought your 1 kg silver bars at R8,500 or R9,000, well done as today’s price is around R18,300 average. Many investors are telling me that the silver price right now ($26.26) is too high to accumulate more silver. They said the same thing when the price was $17.00 per ounce.

This article touches on something that I feel is largely ignored by the broader investment community. Seldom in the past have I been this exited about what I feel is coming in the silver market. We need to get a better understanding of the Silver Paper To Physical Ratio.

The earth only has so much silver. Full stop. You cannot make silver. You cannot destroy silver. Silver is a historical store of wealth and has vast electronic, medical and industrial application. Gold is mainly an investment asset. If you own a physical ounce of silver, you own something that will only become worth much more in the future. The paper market in silver simply works like this. As a buyer, you enter into a futures contract with a seller where you pay today’s price, let us say $26.00 per ounce, and get delivery in a month or two or three, according to your contract. When you take delivery, you can either get your one ounce of silver, or you can be paid in cash. If you settle in cash and the price went up, you will make money. If the price went down, you will loose money. 99% of these future contracts get settled in cash.

The very clever ( the jury is still out on this ) financial gurus have devised a way where they can leverage these paper contracts. They basically sell multiple futures contract for every one ounce of physical silver. This ratio between physical silver and paper silver is called the Physical Silver To Paper Ratio. This ratio used to be 1:188. 188 paper silvers to one physical ounce of silver. This little pyramid scheme have been working nicely for the last 10 years or so.

Now is the moment to really sit up and take notice because here comes the kicker that I am so excited about. The Silver Paper To Physical Ratio right now is 1:363! Wow! If ever there was an indicator that we are running into major physical shortages, this ratio confirms it.

I strongly believe the following scenario is developing in the paper silver market. The vast majority of paper silver contract buyers are businesses that use physical silver for the products they manufacture. Be it medical, industrial or investment. If these buyers cannot get enough silver in the physical markets, mines, refineries etc, they will turn to the paper market and choose to get their contracts settled in physical delivery. The sellers, who must now deliver the physical silver, will be forced to turn to the spot market and buy physical silver to fulfill their contractual obligations. This will send the silver price thru the roof! $50 an ounce is a no brainer. I expect much higher prices though. Many silver dealers overseas are already running out of stock. In South Africa prices from refineries have turned from a discount to back order situation. Do not get left behind!

Call me on 061 544 1256 or email me right now.

 Today’s bullion prices

Disclaimer – Precious Metal Bars (Pty) Ltd is not a registered investment, legal or tax advisor. All investment/financial opinions expressed by Precious Metal Bars are from the personal experience and research of the owner of this site and are intended as educational material. Although best efforts are made to ensure that all information is valid and up to date, occasionally unintended errors and misprints may occur. Unsubscribe