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U.S. Mint Sales Surprisingly Favor Silver

|Includes:SPDR Gold Trust ETF (GLD), SLV

It is time to take a look at the U.S. Mint sales of gold and silver again to see if we can get some interesting conclusions out of it. We know that the U.S. Mint sales are a good proxy for global gold and silver investment demand.

Here is the data:

Chart 1: U.S. Mint gold and silver sales (april 2014 extrapolated)

What immediately surprises me is that the two trends are in reverse (Chart 1). Gold sales (blue) have been hitting lows while silver sales (red) are booming. This urges me to look at the ratio between gold and silver sales.

Apparently, for every ounce of gold sold, they sold 90 ounces of silver in 2014, which cannot last forever (Chart 2). This is because annual silver supply is 1 billion ounces and gold supply is 130 million ounces. This is a ratio of 1 billion / 130 million = 8. So there is only 8 times as much silver available as compared to gold.

Chart 2: Ratio silver to gold ounces sold

So, how can it be that people are buying 90 times more ounces of silver than ounces of gold? Supply and demand will eventually go to equilibrium. Which means either gold goes down or silver goes up in price.

This is why I still think silver is grossly undervalued to gold and that's why I will buy silver and silver mines, waiting for a surge in silver.

Stocks: GLD, SLV