The Gold/Silver Price Ratio is Out of Whack — What’s Next?

Thursday April 24, 2014, 4:15am PDT
By Charlotte McLeod - Exclusive to Silver Investing News
Last month, Silver Investing News (SIN) received an enthusiastic response to the question, “do you think silver is headed for a supply shortage?” Of over 1,000 participants, 81 percent said they believe a silver shortfall is in the works, reinforcing the idea that while silver prices are down, they’re likely not out.
Despite that overwhelmingly affirmative response, the article raised a number of good questions amongst readers. To address some of them, SIN got back in touch with Andrew Chanin, co-founder of the PureFunds ISE Junior Silver ETF (ARCA:SILJ), whose comments sparked the original article.
To start off with, Chanin addressed the nature of the shortage — in other words, whether we’re looking at a silver supply shortage in that silver in the ground is actually running low, or in the sense that at current prices miners simply aren’t able to produce enough of it. The simple answer is that though the amount of high-grade deposits around the world is falling, at the moment the latter issue is the bigger concern; however, Chanin gave a much more detailed response, explaining why that’s the case.
For one thing, he said, “about two-thirds of all mined annual silver comes as a by-product, and much of that is from base-metals mining.” That’s a problem because many people are calling for a slowdown in emerging markets, which could keep prices for base metals depressed. If that happens, he said, “it might actually make sense to put such mines on hold temporarily.” Ultimately, that means “a significant area of silver supply … could get taken offline.”
Another factor, Chanin noted, is that low silver prices are hurting producing companies’ exploration efforts. Sure, he said, silver priced at $16 per ounce, or even $10 an ounce is possible, but “it would be extremely, extremely difficult for silver-mining companies to produce silver at those levels, [and] difficult, if not impossible, for them to do it profitably.”
read more @ http://www.metal.com/newscontent/59887_the-goldsilver-price-ratio-is-out-of-whack-%E2%80%94-what%E2%80%99s-next








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