How Rare are Gold and Silver?

Posted by Vincent Tie on 12 Apr 2017


Have you ever wondered why gold, silver and platinum are often referred to as precious metals? We know that these metals are used frequently in jewelry and bullion, but what makes these metals precious?

Well, they are precious because they are rare.

Before precious metals are sold to consumers, they had to be mined from the earth’s crust. They cannot be printed at the flick of a switch like currencies.

The abundance of elements in the earth’s crust is often measured in parts per million (ppm). Of the three precious metals (gold, silver and platinum), gold is the rarest (0.004 ppm), followed by platinum (0.005 ppm) and silver (0.075 ppm).

Here is how they compare on a chart.

Crustal Abundance of Precious Metals
Crustal Abundance of Precious Metals

Silver seems to stick out like a sore thumb and looks hardly precious in the chart above until metals such as nickel and copper are also included in the chart below. Currently, nickel and copper are often used to mint circulating coins – they have now completely replaced silver and gold in circulation coins.

Crustal Abundance of Precious Metals Compared with Copper and Nickel
Crustal Abundance of Precious Metals Compared with Copper and Nickel

Now, all three precious metals are just represented as thin lines on the chart. Gold, silver and platinum are that rare!

 

More Gold Than Silver Above-ground

From the crustal abundance of precious metals, we can also see that the gold-to-silver ratio in the earth’s crust is about 1:19. This means that there is roughly 19 times more silver than gold in the ground.

However, the mining gold-to-silver ratio is about 1:9 – only 9 ounces of silver are mined for every one ounce of gold. The reality from mining is a stark difference from scientific estimates.

According to the annual survey reports from Thomson Reuters, there are 71,578 tons of ‘identifiable above-ground’ silver stocks. Compare this to the 187,200 tons of above-ground gold stocks. There is actually lesser identifiable silver than gold above-ground.

Despite this, the gold-to-silver ratio, when comparing the prices of both metals, is about 1:70 at the time of writing. In other words, the value of an ounce of gold is equivalent to 70 ounces of silver!

Comparing the different Gold to Silver Ratios
Comparing the different Gold to Silver Ratios

From this perspective, silver is evidently and substantially more undervalued compared to gold.

 

Silver Market in Deficit for 13 Consecutive Years

From the Thomson Reuters 2014 Silver Survey, we can see that the global supply of silver has been steadily increasing since 2004. The same report also shows that global demand for silver has also been consistently higher than the supply resulting in deficits in the physical silver market for at least 13 consecutive years.

The gold market on the other hand has seen surplus in gold supply consecutively since 2013. In the same 13-year period of comparison with silver, there were seven years that ended with gold in surplus.

Evidently, the supply of silver is not keeping pace with its demand. It does not help that the silver supply continues to be decimated when silver is used.

 

Gold is Hoarded While Silver Is Used

Gold is hoarded...

 

Studies have shown that 98% of all gold mined throughout history is still hoarded in the form of coins, bars, jewelry or artifacts.

However, this is different for silver.

Silver continues to be a popular choice in industrial applications given that it is the best element to conduct heat and electricity. This gives silver a myriad of uses.

It is no wonder that silver can be found in thousands of products: printed circuit boards in computers and mobile phones, batteries, electronic switches, solar panels, television screens, RFID chips, etc.

Silver is also used as an antimicrobial agent in medical applications. Its applications include silver being incorporated into wound dressings, treatment of mercury poisoning, used as a cauterizing agent, etc.

Unfortunately, these industrial and medical uses of silver in products also see a large quantity of silver being discarded when these products are used and thrown away. They end up in landfills and are deemed uneconomical to recycle.

It is no wonder then that there is less silver than gold above-ground today.

 

Silver: A Monetary Metal That Is Rare and Undervalued

Between gold, silver and platinum, only gold and silver have been used as money on a large scale over long periods of time throughout history. Although rare, platinum was deemed impractical since it resembled many less expensive metals and it was difficult to work with since it was less malleable than gold or silver.

Silver was used as money more often than gold throughout history. This can still be seen in the names of currencies today that point to their silver roots in the past.

Considering that the gold-to-silver ratio is hovering at 1:70 at the moment, silver is still undervalued and unloved.

Think about it. When you buy silver, you are buying a metal that has been used as money, has great industrial and medical utility, has a limited supply and is undervalued at this moment!

It is truly a unique moment now that we witness such a confluence of these factors.