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THIS is Why I’m Invested in Physical SILVER

by H Mandeel, SGT report

Contrary to many other investors, I did not invest in physical silver out of fear of an economic collapse or inflation or hyperinflation. I invested in silver purely based on the anticipated future supply shortage. To demonstrate my point, here is a chart on the total remaining silver years of supply based on current production rates.

As seen in the green graph chart, in the next 10 years Canada, China and Mexico would be running out of silver. This will remove 9000 tons (289 MILLION ounces) of annual supply from the market. That’s a whopping 40% decrease from current mine supply! And the chart assumes NO INCREASE IN DEMAND over the next 10 years.

How much each country produces:

The importance of orange chart is to show how much physical silver each country produces annually allowing the investor to estimate price shock in case of any export restrictions. For example, China could limit the export of silver as they have less than 10 years of supply – in fact China DID announce an immediate reduction in their physical silver exports by roughly 60% in 2010! Mexico has less than 10 years of supply and could stop exports or monetize silver. And Peru is has high political risk.

I am skeptical of some of the data from Chile, Peru and Poland because when I was working the calculations of dividing production rate by reserves, both Chile and Peru show exactly 50 and 30 years without any decimal points! This means that they just thrown a number and multiplied it by current production to calculate reserves (very crude and unscientific). On the other hand, Poland with 71 years is a bit on the far-side and may included unproven reserves in the estimation! However, I will still accept this data as “correct” and base my calculations on it.

Here is another data chart showing the total available tonnage of silver reserves in the ground in each country:

Let’s start with the definition of “Reserves” first:

Reserves: That part of the reserve base which could be economically extracted or produced at the time of determination. The term reserves need not signify that extraction facilities are in place and operative. Reserves include only recoverable materials; thus, terms such as “extractable reserves” and “recoverable reserves” are redundant and are not a part of this classification system.” – USGS

The process of starting a new mine is daunting, from discovery to start-up to actual mining production the process takes 10 years or so. It’s foolish to anticipate new physical silver supply once the physical shortage becomes evident. It would take many years for new mines to come on-line and even partially replace the anticipated physical silver shortage.

As seen in this chart, physical silver demand increased by an average of 550 tons each year and the price went from $4 to $32 in 10 years. However, in an attempt to be prudent, I use the conservative assumption that silver mine supply will remain fixed at the 2012 rate of 23’800 tons/year (765MM ounces/year) for the next 10 years. No growth, no increase in demand – this despite silver being the MOST NEEDED commodity in technological and industrial manufacturing.

Conclusion:

Even if there is NO fiat currency inflation in the United States, which is laughable…

and NO worldwide economic collapse….

and NO increase in physical silver demand over the next 10 years via industrial need or jewelry or investors like us…

and NO further export restrictions from nations like China – or other supply risks….

We will STILL be facing a around 40% supply shortage by the end of 2022.

The fact is we are approaching peak silver in the next three to four years. The silver price should follow a path similar to what oil did when it catapulted from $20 to over $100. Hence, I expect the physical silver price to be well over $100 before 2015. (Ed. Note: It’s worth reminding our readers that James Turk has long predicted that the price of one ounce of silver will be $400 per ounce by 2014, with gold at $8,000 per ounce.)

The price of physical silver would then continue to rise by more than 15% annually as I assume that the existing silver reserves will continue to be depleted far faster than new discoveries and new production can replace. And with that, silver will finally re-establish the historical silver to gold ratio of 15 to 1. Or, even more likely, the worldwide geological silver to gold ratio of 9 to 1.

Finally, I have to warn you that riding this bull market will not be easy even for a seasoned cowboy. The roller-coaster ride and volatility may be beyond normal human tolerance. You may suffer a blackout or two during some of the stomach turning dips. I have been invested in physical silver for the past 5 years and the silver price remains on target despite all the mind blowing volatility. I currently have 30% of my investment capital invested in physical silver and I stand ready to add 20% more on a sharp price drop if and when it comes – so fair warning Ms. Masters.

Meanwhile, I would ask you to do your own research on the subject before you consider investing in physical silver – or anything else for that matter.

For additional information on silver, please download this USGS report or visit the USGS web site.

This is not investment advice, it’s common sense. It is my firm opinion that we should all keep stacking.

28 comments to THIS is Why I’m Invested in Physical SILVER

  • stacker

    couldnt have said it better. I have 100% of my investment capital in pys. Ag. Phuck the stock market, bond market, IRA’s – 401k’s, all sold and closed. the industrial fundamentals for this metal to go $300-600/oz and stay there are huge. For once in my life I saw an undervalued bubble BEFORE it took off and I’m jumping in with both feet

    • Hman

      When in silver, always have some dry powder of at least 30% of your net investment allowing you to take advantage of the dips to accumulate. And use 50% of this dry powder when RSI indicator is below 30 on the daily chart and the other 50% if it drops another 3 standard deviations from that point.

  • Troy

    That article is so convincing, I think I’ll order another 10 ounce this weekend. Keep Stacking!

  • A047

    I agree 100%. At first the volatility got me worked up when first stacking physical. Once you get educated and realize paper is finished it’s Gold and Silver all the way. This is a perfect time to get in for any newbies out there. It will be the best decision you ever made.

  • A

    http://www.youtube.com/watch?feature=player_embedded&v=Zvl9N9GdraQ

    funniest thing ive scene in ages. a greek telling germany to shove it and explaining the master plan hahahahaha
    MUST WATCH hhaahaha

    this needs to be a post here!

  • Tim

    Well, I DID invest in silver out of fear of an economic collapse and/or hyperinflation. While a future supply shortage would be a good reason to invest in any asset, a few years from now the masses will want gold and silver primarily because they will have realized that PMs are the only way to preserve what remains of their wealth as fiat currencies go to zero.

  • AC_Doctor

    More reasons to add to your stash of the best conductor of electricty in the world that has also been used as real money for over 5000 years…

    AC_Doctor

  • dishesdealer417

    I have my silver for survival but since a LOT of it is in jewelry form (.925 Sterling), I get to enjoy wearing it too. The rest is coinage etc.

    I know there has been talk & articles posted here referencing mining asteroids and stuff and while that may seem farfetched to me, I do wonder if there is there any chance that there are large deposits of silver in land that is now covered by ocean/sea??

    People looking for petroleum have gone offshore to “mine” for it so to speak and sometimes I do worry that they will do the same for silver (I am not even sure that is possible, but if they can do it for oil, then ???)

    Does anybody think that since most of this planet is covered by water that there are offshore deposits of silver that could be gotten to if they were desperate enough for the silver to pay those large costs to get to it??

  • Bob A

    @dishesdealer, at that point I don’t think they’ll be much to worry about as silver will be in the hundreds…the back of JPM broken, the cabal eaten alive, and silver and gold backing the new currency. If they find more, yum, yum, that just means more for us to buy and wear. :-)

  • Scott Wolf

    Tim,

    You are so right.

    With silver,especially,you get the best of both worlds:utility and medium of exchange(MONEY).The best part is, the actual move into metals is not even close at hand.Billions of people still have faith in fiat and will continue to move from paper to paper until they realize that decades of propaganda have led them astray from their own independance.And we will all be sitting pretty!

  • Travis

    I hope Poland has beefed up their military…

  • Ed_B

    What we are seeing and this article shows clearly is the end of CHEAP silver (and gold too, for that matter). The easy to get at deposits have mostly been found and exploited. In a few years, it will only be the hard-to-get silver that will be available. At that point, we will at long last have true price discovery. Anyone who owns silver at that point will be very glad that they do.

    It is a good point to raise in the comments that we may very well be mining for silver under the seas at some point but it definitely will not be cheap. This will be where silver is mined because there is no other source available elsewhere.

    After that, lunar mining will come into play but it too will be very expensive. The good news there is that solar energy can provide all of the energy needed to mine, refine, and transport the finished product back to low Earth orbit, where either shuttle type vehicles or robotic drop tubes will be used to deliver it to Earth.

  • Troy

    If you don’t have any silver, or just a small amount, get some, and quick! Build a 1 year food storage, and don’t forget about clothing, and buy lots of shoes for the coming years. Buy organic seeds, and buy alot of them. Got Silver, got food, got seeds, got guns, and ammo?

  • We Are Change Windsor

    I choose: ‘D’ = All of the Above

    What I mean is, I have looked at every reason to own physical silver and I can not find even one reason NOT to hold as much physical silver as you can get and in any form you can find it.

    Sean, I have to agree with Bix when he mentioned what you said was so true, in that, the hour this thing falls apart, whatever silver you hold will be all you are going to get. There will be so little silver available, no one is going to sell.

    Jeff

  • harman kardon

    I originally got into silver based on the GSR, which at the time was 42:1–it is now over 50:1. Recently I traded some gold for silver, very glad that I did as it increased my stack by over 10%. Once the ratio reverts, and it will, I will trade some silver for gold for a very nice increase in my gold stack. I am 100% invested in metals. I closed my 401k last year and moved all-in over the course of about six months. I continue to add to my position and have acquired one mining share–the company that Santa owns–and have increased that position on several occasions when the cartel has kicked the snot out of the price–thank you, criminal cabel for eliminating the decision making process!!
    Cheap silver is done. It is already a “by-product” of mining other base metals–lead, zinc, copper, etc..

  • Ron

    At the moment:

    Gold : Silver
    55,5 to 1. This is crazy.

    This market is so small.
    I am sure, the panic in the silver market will come.

  • bubba

    Think for a moment after watching the short video that was on Nat Geo a while back about mining silver on dry land…Then what it would take to bring silver up from the bottom of the ocean.

    Think about how much material would have to be brought up from thousands of feet down. Sure perhaps they could use the bouyancy of water to make it easier. Sure new tech may be capable. Sure if there is a will, there is a way.

    If they are dumb enough to try it, we will all have a huge smile…

    Personally, there is no chance of this succeeding…keep stacking any tangibles

  • AnonPatriot

    There is still time, to RESTORE AMERICA NOW!

    Ok, everybody – IF you did NOTHING to support Ron Paul, in his Campaign for President, in 2012 – YOU MAY EFFECTIVELY THANK YOURSELVES FOR ANOTHER 4 YEARS!, OF THE INCREASINGLY CORRUPT STATUS QUO, AND ATTENDANT LOSS OF LIBERTY – NOT TO MENTION – FOUR MORE YEARS OF OBAMNEY! I’ve already donated $200.00 – $100.00 on President’s Day – Feb. 20th, and $100.00, on Tax Day – April 15th – so, if you’ve done more than that, by volunteering, or donating FIAT CURRENCY – congratulations! IF you haven’t – RE-READ THE ABOVE. I will be making another donation on May 17th – May20th, an early donation, that otherwise would have been made on JULY 4th, 2012. I will likely make another donation on JULY 4th, 2012, anyway).

    Ron Paul May 17th – May 20th MONEY BOMB! (Click below to contribute)
    https://secure.ronpaul2012.com/

  • silverman

    silver is an addition…i cant get enough of it.i cant wait to see the market every morning.i just hit a low at 27and some change and the next day payed a dollar more.im not to scared to spend another 1500 2maro…cant wait

  • Sajjad

    John Keynes and now its back in play, or in Vogue….. Ha wait what, China may have to collect Gold reverses from America. Muah Ha Ha !! On the recalibration of the currency Re-Boot China is at the centre of the New World Order. The arc of control for this New World Order starts in Australia in the South, and ends with Finland or Germany in the North. Russia probably does not need to diversify. Gas is king, and Russia has been building the infrastructures to deliver energy for 20 years plus. Now they are moving into Railways, Tran-Siberia to be exact. This will give Russia and the CIS countries direct access to Chinese products, bypassing European shipping. For Iran, this is a huge boost. All those Stans will soon have access to the Asian markets. The Biggest problem for Iran is Georgia and Azerbaijan. Russia has been busy with Railways to Iran ova Armenia and Ossetia. Sooner or later the Americans and BP (Amoco) are going to have to be booted out of Georgia, or Azerbaijan or both. Another thing is that people often believe that China and Soviet Russia were some sort of top down dictatorships. In fact, they worked very much like the Republics. Just because they are a one party system rather than two, does not mean that the people don’t have a say. In China the execution of people for Crimes against Capital is a response by the CCP directly from the people. The people demand justice, and the One Party state must deliver. That dynamic is a discussion for another time. Raising the Local living standard also ties into this mentality. The Two groups are the Washington Consensus, or the Rightists, and the group that wants slower appreciation of the a5 is now called the New Left. ( a5 or 元). The New left are more for the peasants, and they are focused on stability, the Rightists are less sacred of volatility. Stability is the name of the political game in China. They both fear falling into the same trap as the hated Japanese. This is another reason why Japan is the country to watch in Asia at the moment. Japan is the bell weather indicator. What happened to the days when the Worlds second biggest economy (Japan) was a client state of the worlds biggest economy. It was only a few years ago. But that arrangement was never going to last. Thanks to Dan Collins for explaining how China is not in a Bear market, and not even close to the dooms day stuff that we hear from Americans that makes us chuckle, (Who’s got Silver 元 \It reminded me of a figure from Germany that said they had debts running at 82% of GDP. Well thats great news, The American papers were saying it was doomsday for the Reich, but in that toy of financial system you want a minim of 50% debt to GDP and a maximum of about 90% Debt to GDP. So germany is right on target given the current economic climate. Dan Collins explained the situation in China perfectly. I second his information 100%. shay shay Dan Collins, in Return, My Shanghainese is very poor, I (Cantonese is easier for me) I can never get Sausage and Shopping Mall pronounced right. But if you go here Hai Jin Zi (海金滋) I promise you the best Shanghainese food ever.Also Lost heaven down at Fuxing Xi Rd is interesting.

  • MOEEN

    If you don’t have any silver, or just a small amount, get some, and quick!

  • Cristi

    Interesante stiri si recomand logarea.
    Cristi Holban

  • Nice post you have shared. The information you have provide is great. I like your post.

  • For the first time reading this documentations about Silver and gold they are very interesting I like them.

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