silver and gold are money.
gold is money and pretty.
silver is money and industrially useful (best known conductor of electricity and heat, best reflector of light, photosensitive compounds useful in traditional photography, interesting antimicrobial and tonal qualities, etc…).
silver gets used up to far greater extent than does gold.
silver is found in far greater abundance in the pacific “rim of fire” than elsewhere. the relative abundance of silver (in western civ) to gold grew as contact with pacific cultures grew (rennaissance trade with the orient, conquest/rape of mexico – incas, comstock lode nevada etc.) …8:1 ancient rome, 15:1 u. s. coinage act of 1793.
silver becomes less scarce, and is de-monetized, u.s (and others) go on gold standard. (see wm jennings bryan, cross of gold speech).
western miners politically persuade u. s. govt to purchase silver (as “strategic reserve,” really as price support) and u. s. gov builds up HUGE stockpiles.
….
step back a few decades. the industrial revolution begins, soon after, edison invents electricity, industrial silver usage begins, and slowly grows.
somewhere about the sixties, u. s. politicians start to sell off the “strategic reserve.” excess supply depresses what price would otherwise do, and thus discourages mining development.
global usage exceeds global production (structural deficit), the imbalance being made up by “strategic” dishoarding.
this led to the silver price being set by the futures market – a casino which operated primarily as a cash cow for the large banking institutions (GS, JPM, etc) who in the process, built up HUGE short positions which were mostly settled in paper (rolled over) rather than settled by delivery of the actual metal. nice for them …while it lasted.
unfortunately for them the “strategic” reserve, though huge, was finite, and is nearing total depletion.
the large financial institutions are (rumored to be) short billions of ounces. nobody knows exactly but it’s likely several years worth of annual global production. they scraped together enough metal to satisfy the contracts due in december. a medium large pile comes due the end of march. expect much screaming and moaning – with fireworks.
…
demand is growing (solar, electronics, medical, defense, new tech batteries…).
industrial users are getting worried about securing sufficient material to keep their multi-million (billion?) dollar production lines running. each day, they are less likely to accept rollover or cash settlement of their contracts.
…
supply is inelastic. from discovery to production is ten years in a mining friendly jurisdiction. how long to get a permit for a smelter or refinery? most silver is produced as a byproduct of other mining operations. (a copper miner whose silver byproduct is five percent of his revenue is unlikely to increase production if silver price merely doubles or triples.)
…….a short squeeze? an exchange default? a supply shortage? an economic kerfuffle on steroids? all of the above?
how high will the market HAVE TO go to balance the imbalance? short term? long term? anybody’s guess. $hundreds? $thousands?
i think it’s gonna be fun to watch. are your seatbelts buckled?
love,
——
p.s. a well balanced metals portfolio includes brass and lead.