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Katchum
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Albert Sung is the author of Correlation Economics, monitoring breaking economic news on a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at Ashland, a... More
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Correlation Economics
  • U.S. Mint Sales Surprisingly Favor Silver 0 comments
    Apr 20, 2014 4:47 AM | about stocks: 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:

    (click to enlarge)
    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.

    (click to enlarge)
    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
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