Eric Sprott's Fantastic Gold/Silver Figure



Eric Sprott's Fantastic Gold/Silver Figure




Eric Sprott is reported to have said in a March 16, 2013 King World News Blog (http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/16_Eric_Sprott_-_Jim_Sinclair%2C_%2411%2C000_Gold_%26_Skyrocketing_Silver.html)

'Well, the funny part about gold and silver:  If you put all of the gold in the world that is above ground and compare it to the known silver above ground, the ratio is 150 times more gold than silver....'

SLL:

I have pointed out before (http://screwtapefiles.blogspot.com.au/2012/08/so-how-much-silver-is-really-out-there.html) the fallacy in comparing all above ground gold to 'known' amounts of above ground silver, which is basically the amount held in identifiable depositories of 1000 oz LBMA good delivery bars in Warren’s databases.

Let's say that there are 150,000 tones of gold above ground, to keep it simple, which would be a somewhat low but still acceptable consensus amount (As I recall, that figure was actually proposed by Eric Sprott).

If we divide that by 150, we get 1000 tones for Sprott's 'known' above ground Ag, which is also a mere 4,822,650 Troy ounces, but make it 5 million, again to keep it simple..

Identifiable silver held by ETFs, vehicles like Sprott's PSLV, and COMEX depositories is approximately 1,000,000,000 T. oz, once again to keep it simple.

That amount divided by the simplified figure of approximately 5 M T. Oz gives a result of 20 times the total amount of 'known' silver than Sprott says exists.

Of course, there is far more than 1 billion T. Oz of above ground silver, estimated to be at least twenty times more (see also http://screwtapefiles.blogspot.com.au/2012_10_01_archive.html).

So, 20 x 20 = 400, the approximate multiple by which Sprott's figure for the ratio of gold to silver is wide of the mark if you base it on a credible figure for above ground silver in all forms.

Could Sprott possibly be 'talking his own book' once again?  Exaggerating by a factor of 400?

17 comments:

Bullion Baron said...

Based on Sprott's full commentary it looks like he might be talking dollar value ratios, not by weight.

Slow Loris Larry said...

@ BB

Perhaps that is what he meant to convey, but I quoted him accurately. Again:

'Well, the funny part about gold and silver: If you put all of the gold in the world that is above ground and compare it to the known silver above ground, the ratio is 150 times more gold than silver....'

If you correct his statement for relative value by dividing 400 by a gold to silver value per ounce of 50, to continue to keep it simple, he only exaggerated by a factor of eight.

Is that close enough for you?

SLL

duggo said...

Sprott's statement would have me heading for the door if I was invested in his fund.
He is deliberately weaving a story to sell more Silver.
He doesn't mention that all of the "above ground" Gold sits quetly in strong hands. Silver on the other hand as an investment sits in weak hands and will be sold quicker than a "speeding bullet". Last man out the door will be holding a monster box of silver coins.
KingWorldNews is just another advertising agency for Gold and Silver "pushers".
The great "Great Cyprus Bank Heist" is the thing that will further the collapse of banks and make people buy Gold. Not Sprott or KWN.

m4cher said...

... and silver also I'd assume. Just when the broader western poulation realizes that bank deposits are not that safe and gold is too expensive for the common man, silver will be dragged along, wont it?

Warren James said...

@m4cher, yes, but maybe only one eighth of what you're expecting.

But I agree the general public can't discern whether a tonne of lead is heavier than a tonne of feathers.

Reality is won by those who sell it best, this much is clear.

duggo said...

@m4cher
"Gold is too expensive for the common man"
I often see this when people talk about buying Silver.

I never understand what they are talking about.

1 gram of Gold costs $51
2 oz of Silver costs $57.50

What's easier to carry in your wallet:- one Krugerrand or 55 one ounce Silver coins?

If precious metals are not a meaningful part of your total wealth then you are just a dabbler. So if you have a "meaningful" stash Gold is by far the better choice.

Bullion Baron said...

@SLL, I am still lost in your figures, by my calculation 1000 tonnes of Silver is closer to 32m troy ounces, not 5m. I agree that Sprott's quote is not that clear in meaning, but he then goes on to talk about a 1/1 ratio with purchasing at the US Mint which is definitely value based, not ounces, so I assume all his quotes on ratios are also value based, but could be wrong.

@duggo, we are talking about the public here, where has common sense ever prevailed? The perception of more value for money will win out with public speculating on Silver more so than Gold is my prediction. Yes Gold is a more convenient store of wealth, but then some might see that as an opportunity for Silver to catchup...

Slow Loris Larry said...

@ BB

You are certainly correct about 1000 tones being a bit more than 32 million Troy ounces. I cannot reconstruct what I must have been thinking yesterday! Make that around 3 times, not 20!

Having now had the opportunity to listen to Eric Sprott’s KWN interview, released on Sunday, May 17, I think that I heard him actually say ‘there is 100 to 150 times more dollars in gold than in silver’, which is NOT what he was reported to have said in the blog transcript. So, your interpretation was correct.

Sprott did qualify his remark by referring to ‘known’ amounts, but then said that no one really knows how much silver is above ground (a point on which we are in basic agreement, although we do seem to have radically different ideas about how much there might actually be in total – see below).

Let’s use some more primary school arithmetic, hopefully correctly this time, on what I now think Sprott really said, although I had to listen very carefully several times to be reasonably certain.

150,000 tonnes of gold is 4,822,650,000 Troy ounces, so @ $1600 per T oz the total dollar value would be $7,716,240,000,000, which is close to eight trillion dollars.

Divided by 100, you get $77,162,400,000, and divided by 150 you get $51,441,600,000

Divide those figures by $29 per T oz, and you get 2,660,772,414 T oz and 1,773,848,276 T oz respectively, which produce an average figure of 2,217,310,340 T oz of silver.

Interestingly, that average figure is not out of the ball park in comparison to the amount of silver that A Report on Stocks of Silver Around the World (The Silver Institute, 1992) estimated would eventually become available to the market at a sustained price of $20 per ounce. (See http://screwtapefiles.blogspot.com.au/2012/10/what-and-where-was-all-that-silver.html for more details on the form that much silver might have taken.)

That 2.2 billion T oz is also roughly 10% or so of what I have estimated to be nearly 20 billion ounces of total above ground silver in all forms, approximately four times the total for above ground gold (http://screwtapefiles.blogspot.com.au/2012/08/so-how-much-silver-is-really-out-there.html).

So, the bottom line is that Sprott may well be more or less correct in thinking that ‘known’ silver (available to the market at around current prices) could amount to 2 billion or so Troy ounces, having a dollar value of 1% or less of the dollar value of all the above ground gold.

How much of that gold is ‘known’ and available to the market at current prices is of course a different, and intriguing, matter.

duggo said...

Anyone have any idea which coins?

"PRESS RELEASE

12 March 2013 - Consolidated financial statement of the Eurosystem as at 8 March 2013

Items not related to monetary policy operations

In the week ending 8 March 2013 the increase of EUR 1 million in gold and gold receivables (asset item 1) reflected the purchase of gold coin by one Eurosystem central bank."

victorthecleaner said...


FYI re Sprott

http://twitter.com/VictorCleaner/status/314137843108827136

Victor

77 said...

fomc decisions haven't been kind to gold, but what has during a 5 month down run...

gold did have a change of character by popping twice off the hit on non-farm payroll and the hit on last week's initial claims..

ETF liquidation is still a significant drag on gold. Last week saw 518,000 ounces of metal sold overall, with nearly all of the major funds participating in the selling. This was a touch lower than the previous week’s selling (541,000 ounces) but overall the pace of outflows remains high enough to worry the bulls.

gold/silver ratio rose for 7th straight session tuesday, let's change that on Fomc decision weds.!

cheers!

victorthecleaner said...


When GLD loses inventory, this has been an indicator for a rising London price of gold (although this indicator might have stopped working in summer 2012).

Take a look at

http://victorthecleaner.wordpress.com/2012/06/01/gld-the-central-bank-of-the-bullion-banks/

http://fofoa.blogspot.com/2012/06/gld-talk-continued.html

http://fofoa.blogspot.com/2013/01/the-two-legged-dog.html

Btw the gold/silver ratio can easily go beyond 100 remain there.

Victor

SugarLover said...

The new improved freegold forum, come join in the fun, dissent allowed.

http://neuralnetwriter.cylo42.com/node/4014?page=2

PS...Blondie = Capt Goodvibes.

Slow Loris Larry said...

For those who have not been checking it regularly, I am pleased to inform you that Bron's 'Gold Chat' has a new post, and can recommend that you check it out:

http://goldchat.blogspot.com.au/

RobX Miller said...

.."‘known’ silver (available to the market at around current prices) could amount to 2 billion or so Troy ounces .." SHOCKED
Please put this into terms a novice like myself can understand. (all about me, not the numbers).
When I was much younger, I use to work after high-school 20 hours a week for $1.25 and hour and go to the cash register and pick out the 90% silver quarters for my pay.

It would appear possible that if Cyprus and the PIGS fail - and in general - every adult on Earth though it might become traditional to own at least one ounce of silver ... would that even be possible for every adult on Earth to own a silver ounce?
What about 20% of adults on earth feeling they should own an ounce?

2 B ounces is just a little shocking to someone who grew up with everyone carrying around ounces of silver in a front pocket and keeping ten to thirty ounces in a glass coin jar at home. This was a farming community considered lower than middle class.

Do you have any populations to silver oz ratios over the years? While reading through your numbers, I was expecting at least 50 B ounces. - Regards

Slow Loris Larry said...

@Rob

If you follow the URLs in my two posts on this thread, you will find the figures you want to see.

The bottom line is that there may have been as much as 40 Billion Troy Ounces of silver ever produced since mining began.

Best estimates from a number of sources is that as many as 20 BTO remain above ground in various forms, mostly held by families and institutions other than governments.

The two billion ounces 'available to the market' is an average estimate, and it depends on the prevailing market price. More becomes available over time as the price rises, but some significant amount will never be sold.

As the world's population is now a bit above 7 billion, each of us would have around three ounces of silver if it were ever to be evenly distributed.

But it never will be!

RobX Miller said...

What a way to turn Billions into something real! Wow, would have expected much more than that.