The debate on the amount of above-ground silver stocks is completely meaningless when we compare it to the value of global assets. It is also true when we compare the estimated above-ground stocks of gold versus silver. While there may be more silver held in the world than industry analysts have forecasted, it’s still a mere fraction compared to global assets.
Recently, Jan Nieuwenhuijs of Voima Gold, formerly known as “Koos Jansen” at Bullionstar, wrote an article titled, “How Much Silver Is Above Ground?” I had several followers email me this article and asked my opinion. So, I thought it best to put out my own commentary to set the record straight.
Jan stated the following in his article linked above about silver above-ground stocks:
Above-ground silver stocks are an order of magnitude higher than what is widely assumed.
In total, there were an estimated 1.6 million metric tonnes of physical silver above ground by late 2018. This amount is 20 times higher than what The Silver Institute discloses as “identifiable above-ground stocks,” which is what’s widely assumed to be the total above-ground stock. The huge discrepancy is important to analyze, as it reveals silver’s true stock to flow ratio and supply and demand dynamics. Misunderstanding these dynamics would mean failing to understand the price of silver.
So, if we go by what Jan is implying in his article, he believes the world contains 20 times, or 1.6 million metric tons more “identifiable above-ground silver stocks” than what is widely assumed. However, the 2019 World Silver Survey reported that the world held about 2.5 billion oz of silver (approx. 79,000 metric tons) as identifiable above-ground silver stocks. Most of this silver was held as “Bullion Stocks & Coins.”
Above-Ground Silver Stocks Comparison:
Jan- Voima Gold = 1,600,000 metric tons
World Silver Survey = 79,000 metric tons
By doing some simple math, if we divide the 1.6 million metric tons by 79,000 metric tons, we arrive at the 20 to 1 ratio… VIOLA!!
This is how Jan calculates that there is 20 times more silver in the world than what GFMS or the World Silver Survey estimates. Jan derived his figure on global silver above-ground stocks from charts in the article linked above.
By adding up all the silver mine supply since 1900, including a base of 45,000 metric tons, the total amount equals 1.6 million metric tons. However, this amount wasn’t large enough, so Jan used the estimate from the CPM Group of 1,751,000 metric tons and then divided this amount into the various categories:
Jan states the following in regards to the current World Silver Survey (GFMS) “Stock to Flow Ratio” of 3 to 1 that is too low:
From the quote and the table, readers are supposed to believe the above-ground silver stock stood at 79,308 tonnes by late 2018. Annual mine production in 2018 was 27,000 tonnes, implying a stock to flow ratio of 3.
However, in the World Silver Survey 2019, we also read:
Jewelry, silverware and other finished fabricated products that are in the possession of end-users are not included in our definition of above-ground refined stocks.
But why is jewelry excluded from the data? Silver jewelry should be included for the same reason gold jewelry is included in the above-ground stock of gold: if the price is right, jewelry can and will be sold into the market. We must conclude that the data from The Silver Institute is incomplete. Additionally, in the World Silver Survey 2019, we find all sorts of supply and demand figures that are not correlated with the price of silver, confirming this data is incomplete.
Here is where I differ from Jan’s analysis of above-ground silver stocks. Jan claims that the Silver Jewelry should be included in the calculation of above-ground silver stocks. In his chart above, he shows that approximately 791,000 metric tons of silver are in the form of jewelry, decorative, and religious.
Jan claims that “If the price is right,” then silver jewelry can and will be sold into the market. Really?? To what degree? If we look at the 2015 Silver Scrap Report for the Silver Insitute, silver jewelry recycling is one of the lowest categories:
On an annual basis, about 10% of the silver scrap supply comes from silver jewelry recycling. However, silver jewelry demand in 2018 of 212 million oz (Moz) accounted for nearly 25% of the global silver mine supply of 856 Moz.
On the other hand, 90% of annual gold scrap supply comes from gold jewelry recycling, according to the World Gold Council:
Recycling is the source of gold supply that is most immediately responsive to the gold price and economic shocks. The majority of recycled gold – around 90% – comes from jewellery, with gold extracted from technology providing the remaining 10%.
The following chart shows the MAJOR difference between Gold and Silver Jewelry scrap supply:
So, why is only 10% of the annual silver scrap supply from Jewelry compared to 90% for gold?? It’s quite simple. No one wants to go down to the Pawnshop to make $5-10 bucks selling their scrap silver jewelry. If we consider the typical size of a gold and silver ring, it’s worth the time and aggravation to pawn gold jewelry, not silver:
My research found that a typical 24 Karat gold ring will have approximately 5 grams of gold, and a Sterling Silver ring will have about 5.5 grams of silver. Thus, 5 grams of gold will scrap out to be $273, and 5.5 grams of silver will be worth a lousy $3.00 (based on $1,475 gold and $17 silver).
Why on earth would anyone waste their time trying to sell 3-4 silver rings or assorted silver jewelry for $10-$15 when they can sell 1-2 gold rings and make $250-$500??
By Jan stating there is all this under reported 791,000 metric tons of “above-ground stock” held in silver jewelry is quite simply… WISHFUL THINKING. When silver reached a high of $50 in 2011, the most silver jewelry recycled was 28 Moz, just 13% of total silver scrap supply that year.
Gold jewelry annual scrap recycling accounts for roughly 25% of the yearly total global gold supply. In contrast, annual silver jewelry recycling is only a measly 2% of the yearly total global silver supply. So, silver jewelry should not be included as “identifiable above-ground stocks.”
According to my best estimates, there may be 357,000 metric tons of above-ground silver stocks if we use the following methodology.
10% of Silver Jewelry 791,000 mt = 79,000 mt
20% of Industrial Silver 852,000 mt = 170,000 mt
100% Silver Bullion-Bars = 108,000 mt
Grand Total = 357,000 metric tons
Now, Jan claims there is at least a 30/1 Stock to Flow ratio for silver if we include all the silver jewelry. That ratio is calculated by the following:
Silver Bullion-Coins (108,000 mt) + Silver Jewelry (791,000 mt) = 899,000 mt
Global Silver Mine Supply = 27,000 mt
899,000 mt / 27,000 mt = 33
However, Jan also says that if we include the Industrial silver stocks (852,000 mt), then the Silver stock to flow ratio could be 60/1. I can tell you that most of that 852,000 metric tons of Industrial silver will never be recycled. It’s gone forever. We cannot count silver that was put into electronics that is now sitting 50 feet below a garbage dump as an ABOVE-GROUND SILVER STOCK. This is pure rubbish.
So, if we go by my overly optimistic figure of 357,000 metric tons of possible above-ground silver stocks, then the stock to flow ratio is no more than 14/1:
There is a much higher stock to flow ratio for gold at 51/1 versus 14/1 for silver because the recycling of silver in such small amounts is not economically viable for the majority of the public. And actually, I believe a more realistic above-ground stock for silver is closer to 200,000 metric tons, about 2.5 times more than the 79,000 mt stated by the World Silver Survey.
We must remember, while there is a lot of silver above-ground, most of it won’t ever be recycled. Thus, it is better to label this silver as lost RIFF-RAFF than above-ground stocks.
Even if we assume that 357,000 metric tons of above-ground silver stocks were sold into the market at $17, that would equal $195 billion versus $8 trillion for gold at 170,000 metric tons of above-ground stocks. And, if we compare the $195 billion in possible silver stocks to the $470 trillion in global assets… it’s a fraction of a fraction.
INVESTOR WARNING: Watch Out For Garbage Penny Stocks Like GOLD X
If you are considering investing in gold-silver or resource penny stocks, WATCH OUT. The overwhelming majority of pink sheets or penny stocks with five letters in the ticker will never become commercial mines. Rather, the peddling of these stocks is mostly done to make money for the owners, pump, and dump websites and investors in the KNOW.
There is a stock called GOLD X that is currently being promoted. I wouldn’t buy this stock even if I were given money to purchase it. GOLD X, formerly known as Sandspring Resources, did an 8-1 reverse spilt, thus pushing its price over $2.00 on the Canadian exchange. Here is the price before the 8-1 reverse split on November 29th:
Now, here is the GOLD X chart after the 8-1 reverse split:
If a company is changing its name and doing an 8-1 reverse split, it means they are ready to start BAMBOOZLING a new group of SUCKERS. And of course, they are going to get a new group of SUCKERS to invest because every day, a new SUCKER IS BORN.
So, if you want to throw your money away on the chance of STRIKING GOLD in a penny stock, GOLD X is a great candidate. However, you would be much better off buying physical gold and silver than wasting your time of worthless penny stocks.