Can You Pass the 2021 Silver Quiz?

It’s time for our annual silver quiz! 

CPM Group has released their 2020 data, one of the more comprehensive reports in our industry. It gives us an accurate and final picture of what transpired last year, as well as how it sets up 2021 and beyond.

This will be fun, and can be a great introduction for investors just coming into this market. I’ll combine some questions of my own, and will start easy, but let’s see if I can stump a few silver bugs by the end. ☺ 

See how many you can get correct (answers at the end), and more importantly, consider what the data suggests may be ahead for the silver price over the next few years…

2021 Silver Quiz

1. Which silver coin was manufactured first?

1. Silver Eagle
2. Silver Maple Leaf
3. Silver Krugerrand

2. What is the primary reason silver tends to outperform gold? 

1. It was used in US currency
2. It is a much smaller market, so incoming funds have a greater impact
3. There are more silver bugs than gold bugs

3. What is the primary difference between a coin and a round? 

1. Rounds come in different sizes
2. Coins are prettier
3. Coins are produced by governments, rounds by private mints

4. Last year, during the pandemic, silver scrap supply fell.

1. True
2. False

5. How many new primary silver mines came online last year?

1. One
2. Two
3. Five
4. Nine

6. The amount of silver held in inventory by governments worldwide is:

1. 1 billion ounces 
2. 500 million ounces
3. 100 million ounces
4. <50 million ounces

7. There are more silver bullion coins in existence today than 30 years ago.

1. True
2. False

8. The factor that has the biggest impact on the silver price is demand from:

1. Electronics
2. Jewelry
3. Investment
4. Medical/Biocides

9. Silver supply fell last year due to the pandemic, but in general is rising.

1. True
2. False

10. The top selling product at GoldSilver is what?

1. Silver Eagle
2. Silver Eagle monster box
3. 100-ounce silver bar
4. InstaVault Silver

Answers

1. Which silver coin was manufactured first?

The Silver Eagle was first manufactured by the US Mint in 1986 (answer A). The Silver Maple Leaf was introduced in 1988. And while the gold Krugerrand was one of the first sovereign coins ever produced, the silver Krugerrand wasn’t made until 2017.

2. What is the primary reason silver tends to outperform gold? 

The silver price tends to move more than gold, both up and down, because it is a much smaller market (answer B). It takes less capital entering or exiting the sector to impact its price. We believe this will have an enormous impact on the silver price in the next crisis, when the masses crowd in, setting up another huge spike.

3. What is the primary difference between a coin and a round? 

The word “coin” technically implies is was produced by a government mint, sometimes called a sovereign coin, which means it comes with a guarantee for purity and weight. Rounds are manufactured by private mints (answer C).

While sovereign coins have higher premiums upfront, it is not uncommon to get that premium back when selling. In fact, I’ve been paid above spot for sovereign coins before, and I think it’ll happen again.

4. Last year, during the pandemic, silver supply from scrap fell.

False! Perhaps surprisingly, more silver was added to supply from scrap last year than the year before. The primary reason is because silver prices were higher, prompting industry and scrap holders to recycle for a bigger payout.

Supply from scrap silver varies each year, but tends to increase when the silver price is higher. Scrap from jewelry increases also during periods of economic distress, as the tough times push people to look for additional income.

5. How many new primary silver mines came online last year?

Just one! (answer A). Only 12 million ounces of new capacity came from a new primary silver mine last year, all from the MAG/Fresnillo Juanicipio operation in Mexico. 

CPM points out that new silver capacity is down a whopping 67% from 2013. And it will be lower in 2021… just seven million ounces of new capacity is expected to come online this year.

Importantly, this trend is not expected to let up for at least several years, as it takes many years of exploration and development to bring new supply to the market… and executives are only now just starting to spend more on exploration and development.

6. The amount of silver held in inventory by governments worldwide is…

Only a handful of governments hold inventories of physical silver (the US, Mexico and India are the main ones), and worldwide it totals just 46.8 million ounces (answer D). This is equivalent to just three weeks of mine production.

Governments held 359 million ounces in 1970, mostly because silver had been used in actual circulating currency (what today is called junk silver).

Would governments ever want to stockpile silver again? It’s possible, for several potential reasons, and since it would represent a new buyer you can imagine what it could do to the price.

7. There are more silver bullion coins in existence today than 30 years ago.

False! Despite greater production over the past several decades, the amount of silver bullion coins is lower than the peak in the late 1980s. Here’s what CPM Group’s data show:

Of the total estimated above-ground silver of 5.43 billion ounces, bullion coins total approximately 2.03 billion ounces.

There are roughly 7.8 billion people in the world. They won’t all want silver, but if Mike Maloney is right about how bad the next crisis could get…

8. The factor that has the biggest impact on the silver price is demand from:

Investors (answer C). While industrial demand is poised to grow significantly, historically it is investment demand that has the biggest impact on the silver price. If investors buy it rises; if they sell the price tends to falls, as history shows:

The implication here is obvious if you subscribe to our outlook: investors will increasingly crowd into silver (and gold) when the next monetary event strikes. And research shows it is coming.

9. Silver supply fell last year due to the pandemic, but in general is rising.

False. 

Total silver supply did indeed fall last year—but as CPM Group reports (emphasis mine), “mine supply has been in a generally declining trend since 2016 for a variety of reasons, ranging from weak silver prices, shuttering of some major silver mines in recent years, and an overall decline in new silver mine capacity. The covid-19 related mine shutdowns were one more issue to the list of preexisting troubles. Silver mine supply dropped to 729.7 million ounces during 2020, down 4.5% from 2019 and the lowest level since 2012.”

10. The top selling product at GoldSilver is what?

The silver Eagle monster box used to be the most purchased item at GoldSilver, and second was the 100-ounce silver bar. But since its introduction the InstaVault Silver program is now the most popular (answer D).

Why? Since premiums are still elevated, InstaVault allows investors to get direct exposure to physical silver inexpensively, and then convert to whole ounce silver coins and bars later when premiums normalize (or just sell). Mike explains it briefly in the short video on this page.

Are You a Silver Bug?

If you scored 8 or more correctly, we think you’re a “GoldSilver” silver bug! Either way we think this knowledge will make you a more educated investor, what Mike believes is the most important thing one can do to prepare for the environment ahead.

There are lots more questions that could be asked about silver, of course. And this may have been too easy for many of our readers—but it does represent a good reminder of why we’re overweight silver at this point in history. 

And with the gold/silver ratio still above 65—a full 30% above its historical average of 50—it remains a strong buy for investors.

About Jeff Clark

An active investor with a love of writing, Jeff Clark is a globally recognized authority on precious metals. As the son of an award-winning gold panner, with family-owned mining claims in California, Arizona, and Nevada, Jeff has deep roots in the industry. Jeff regularly speaks at precious metals conferences, serves on the board at Strategic Wealth Preservation in Grand Cayman, and provides exclusive analysis and market commentary to GoldSilver customers. Follow Jeff on Twitter @TheGoldAdvisor