Gold Is a Better Investment Than Silver

choi

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徐秀雰, 白银暴跌，民间炒银热情依旧(2). 今日早报 (浙江日报报业集团所属), May 4, 2011.
http://www.chinanews.com/fortune/2011/05-04/3015453_2.shtml

Quote:

2011年 "5月1日，[货币战争》的作者] 宋鸿兵又在博客中表示，白银比黄金更稀缺，作为投资，购买白银比购买黄金更划算。'在人类5000年的历史上，金银的比价始终维持在1∶16左右，现代科学发现，地壳里的黄金和白银储量的比例大约是1∶17。从存量上看，世界黄金的藏量从1940年的大约3万吨增加到现在的大约15万吨，70年中大约增加了5倍。与此同时，白银的存量则从30万吨下降到大约3万吨，减少了90%。从绝对数量上看，目前白银的存量只有黄金存量的1/5。这就意味着，白银比黄金更为稀缺'")

"'美国地质调查局的调查表明，白银将是人类历史上第一种被开采殆尽的金属，时间大约只有12.3年。' 宋鸿兵说，目前全世界市场上能够买到的白银存量大约是7亿盎司，按现在每盎司48美元的价格计算，总价值不过336亿美元。这样一个极具诱惑力而且非常小的市场，一旦被市场的雷达锁定，在全球资金的猛烈轰击下，价格的暴涨将是不可避免的。

"据宋鸿兵介绍，在这方面，巴菲特再次显示出作为'股神'的投资眼光。


My comment: This guy is full of hot air.
(1) Troy ounce
http://en.wikipedia.org/wiki/Troy_ounce
(1 Troy ounce = 31.1g; 1kg = 32.151 Troy ounces; The term "Troy" ounce probably originated in early Middle Ages as a weight unit used at fairs of Troyes, Champagne, France)
(2) Hereafter, "ounce" means "troy ounce."
(3) Firstly, Warren Buffet's Berkshire Hathaway issued a press release on Feb 13, 1998 announcing having in 1997 bought 129,710,000 ounces of silver at $5/ounce.

Jon A Nones, Warren Buffett Sells the Family Silver. ResourceInvestor.com, May 7, 2006
http://www.resourceinvestor.com/News/2006/5/Pages/Warren-Buffett-Sells-the-Family-Silver.aspx
("Buffett said that Berkshire had not benefited from the particularly steep rise in silver prices. 'What the wise man does at beginning, the fool does in the end * * *,' he [Buffet] said")

Before today I had not heard of 宋鸿兵. Judging from this fact, Mr Song is a fool.

(4) Mr Song is ignorant, but foolhardy at the same time.

There is plenty of silver in the world to go around, though industrail use has outstriped production for decades, which is termed the silver deficit.

(a) WC Butterman and HE Hilliard, Silver. US Geological Survey (USGS), US Deaprtment of the Interior, Open-File Report 2004-1251 (Mineral Commodity Profiles)
http://pubs.usgs.gov/of/2004/1251/2004-1251.pdf

Plerase read only section "Historical Background" which started at the page 1 of the text, including the following salient points:
(i) Figure 1 indicated US produced ~1.750 metric tons (also known as tonnes) in 2000.
(ii) "In 1858, the Comstock Lode was discovered in Nevada, and along with other deposits found in Nevada and other western States, it made the United States the world’s largest silver producer from the early 1870s until nearly the end of the 19th century (fig. 1).

"Total world silver mine production from prehistory through 2001 is estimated by the U.S. Geological Survey (USGS) to have been about 1.26 million metric tons (Mt), one-half of which was mined in the last 62 years of the period.  * * * U.S. silver mine production, which was negligible before 1861, totaled about 194,600 t through 2001; this is more than 15 percent of the world cumulative total. U

* ductile (adj; Latin ductere): "capable of being drawn out into wire or thread"  延展性
www.m-w.com

(b) Mr Song emphasizes, "与此同时，白银的存量则从30万吨下降到大约3万吨."

However, each year the world produces more than 20,000 metric tons. See
KE Porter, HE Hilliard, and WE Brooks. Silver Statistics. USGS, Nov 30, 2010 http://minerals.usgs.gov/ds/2005/140/silver.pdf
(The last column shows "World production" for 2009 was 21,800 metric tons silver content)

(5) Gold.

Gold: a commodity like no other. World Gold Council, Apr 12, 2011.

World Gold Coucil is based in London. Its website (www.gold.org) requires registration to download. So yuo may want to read the pirated report by looking for it in the Web. The file is big (2.4MB), so it takes time to download.

Page number is in teh right lower corner, starting from page 1.

At page 7 (marked as "06_07" with 06 to the left and 07 to the right, side by side) is the section "Bullion market" whose first two paragraphs are as follows (footnotes omitted).

"As of 2010, we estimate that approximately 168,300 tonnes of gold has been mined over the course of human history (Chart 1). Fifty percent of above ground stocks exist in jewellery form. Gold used in technological applications, dentistry and other forms of fabrication accounts for an additional 12%. However, it is more common to estimate the size of the FINANCIAL or INVESTABLE gold market by looking at private investment and official sector bullion holdings, which are considered to be in near-market form. Together, these two components account for approximately 36% of all above
ground gold stocks or approximately 60,400 tonnes of gold.

"Using the 2010 average price of gold of US$1,224.52/oz, the size of financial gold holdings is equivalent to US$2.4tn [trillion]. To put that into context, the gold market is larger than any single European sovereign debt market, yet it is no-one’s liability. The gold market is even comparable to the size of US government-guaranteed debt (US$2.7tn), otherwise known as the agency market. By comparison, above-ground silver stocks represent a smaller market. Industry estimates suggest that identified silver bullion stocks by the end of 2009 were around 31,000 tonnes. Even with a conservative assumption that the actual amount of silver available to the market in terms of bars and coins is twice as large, at an average price of US$20.25/oz for 2010, the size of the financial silver market would be
equivalent to $40.5bn dollars (less than 2% of the financial gold market). Furthermore, as of 2009, total above ground stock estimates for copper and platinum were a much smaller US$7.6bn and US$3.5bn respectively.

My comment:
(a) Paragraph 2 stated, "Industry estimates suggest that identified silver bullion stocks by the end of 2009 were around 31,000 tonnes." So Mr Song is right to a point, though I have no way of knowing if it was "30万吨" in 1940, as alleged by Mr Song.
(b) Mr Somg contemplates cornering world silver market. But will he want to corner smaller markets of copper or platinum (mentioned in paragraph 2)?
(c) Mr Song forget a ket parametric: liquidity. See
"Derivative market" at page 8: "Table 5 summarises these results for futures contracts, which tend to be the most liquid derivatives contracts. Gold is the largest and most liquid commodity futures market after the oil market."

Table 5  showed fluidity of copper (No 3), corn (4), soybean (5), and silver (12).

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※ 修改:．choi 于 Sep  9 15:29:32 修改本文．[FROM: 129.10.0.0]