Hi stackers, For the data addicts here, some interesting graphs on Silver Prices in AUD over the last half century. Hope you enjoy (took ages to compile the data). I know that there should be a second data set for the 20 years as a lot changes in 50 years…..but that will be for another day. I’ve also gone to the liberty to invent a ratio to explain Silvers value vs average weekly earnings – called the Silver to Wage Ratio (SWR). (certainly exists somewhere else though) Some basic information on the data: Normalised to AUD to remove the USD exchange rate fluctuations for Silver/Gold as I wanted to have single variables to measure against. Data sourced from ABS, RBA and University of QLD. I had to do a lot of massaging of the data to align it. ASX200 data only goes back so far before it was only All Ords, so I’ve cut it off short to reflect this, otherwise the comparison is distorted to a smaller value index. House prices are an average of all capital cities (houses, not units). I had though about putting a modifier on Sydney due to it raising the median price so much, but thought against it. Average weekly pay level is that of an adult worker (male and female) All these charts can be flipped so that they are ratios of asset vs silver, rather than oz's of silver. The other important point is that these are individual comparisons against other Australian asset classes. This means that you can always make the two assumptions of silver vs the other asset, has it gone up or has the asset gone down etc. I will argue that say housing for example, it looks terrible for silver – but we could be seeing a time of housing prices reducing or stagnating vs silver. Time will tell, but I personally think the chart shows housing is overvalued vs silver, rather than silver losing a lot of value. Interesting Data Points Historically, Silver looks to be fairly valued right now when measured against average Weekly Pay, at 71.2oz per Week. Since 2010 Silver has averaged 25,720oz per Australian House, but the 52 year average of Silver Ounces Per House is 18,500. This shows an astonishing rise in value of the Median House price compared to Silver. When benchmarking against average pay, you could assume that housing is overvalued. Silver has averaged 290oz per share of the Aussie index, the ASX200 (XJO) over the last few decades. We are currently at 244oz Silver, which you could say means that silver is expensive or that the ASX200 is currently cheap. Looking at the average of silver compared to weekly pay, id say that the ASX200 is undervalued vs Silver. Again, just an assumption. If we could have a statistical reset or rebalancing towards averages In a nice perfect world, this is what would happen to these asset classes: House prices would fall 30-50%. Gold would fall. ASX200 would rise. Silver would remain flat. I think that the charts have shown me that silver has fallen to a long term average when looking at our income levels as the reference point, and Housing/Gold are over valued. If the shorter term averages are increasing to new levels, then id argue that silver has alot of room to run over the next 10 years. I have not put in long term returns of asset classes in % terms as this was more a look at relationships of local assets. But we all recognise that precious metals do well long term – just maybe not as well as some other things. The last point I want to make is regarding the rising interest rate environment we find ourselves in as this is a hot topic regarding the recent fall in PM prices. I can’t find the data source at the moment but there is a great statistical study looking at the correlation of gold and silver prices to periods of rising rates. Basically – the study found a very low correlation score that indicated its effectively random as to silver or gold prices going up or down when rates are rising. Just happens to be right now that prices are going down. What's important as you all know, is the longer term timeframes of prices.
@GreatWhiteBullion thanks, excellent post. Is there a case that could be made that wages are "undervalued" and therefore the long term average of the SWR (and all the other wage to asset ratios) may not be accurately reflecting the ratio between the two sets of data? The raw data of course says silver is fairly priced.
That is interesting. Although, a lot of work to provide a rather obscure perspective on the overall market. Supply and demand fundamentals will always be the best pathway to analyse an assets "value". Gold represents $1100 USD in value if it's represented in energy expenditure (Cost to mine). Silver is about $15 USD. I don't know if price ratio's offer a meaningful measure of value, but it is fascinating to see the divergence over the decades.
The raw data suggests that we have been consuming above-ground stockpiles at a rather rapid pace and the price of silver today is extremely unsustainable in the long-term. It would be much much higher if it wasn't managed by feeding the physical markets in times of deficit.
Total annual supply was higher than demand in 7 out the 11 previous years. https://www.silverinstitute.org/silver-supply-demand/
Lol, it depends on which year of the survey you look at. Notice the "Source" section down at the bottom says 'Metals Focus' on yours and this one says CFMS, Thompson Routers / the silver institute. And also notice how your 11th year is actually a forecast, not the actual figures And notice how mine has a catagory for "net government sales". They are feeding the physical market from their stockpiles. They've been doing it since the Coinage Act was signed in 1965. President Johnson even said in his remarks when signing the coinage Act: "If anybody has any idea of hoarding our silver coins, let me say this. Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin. There will be no profit in holding them out of circulation for the value of their silver content." https://www.presidency.ucsb.edu/documents/remarks-the-signing-the-coinage-act
The Silver Institute switched to using Metals Focus in 2020. You're right though, the data in the tables do change every year, fk knows why, they do say that the various sources don't always add up consistently. Yep, that category could now be "Net Official Silver Sales" now and to quote The Silver Institute: US Treasury doesn't have any silver which is in line with pretty much every other advanced nation's CB assets therefore it cannot manipulate or suppress the POS.
The US Treasury doesn't have to have any declared silver for this activity to occur by their direction. The Bullion banks are made custodians of the metal and act on behalf of the interest of their clients. They aren't required to disclose who their clients are, they just require the metal to place large hedging positions in the paper markets. It's believed to be done via the SLV and Comex repositories in the physical markets. GATA have been connecting the dots on this for years. There's no absolute evidence, but there's enough to reach the logical conclusion that the markets are managed in this way: - President Johnson's remarks that treasury would intervene in the markets to control the price. - We have a clear record of government sales leading up to 2016, which equate to billions of Oz's over several decades. - Bullion banks are custodians of massive repositories that conveniently dump physical silver into the market around the peak of every bull run. (Chart for reference). - Imposed comex position limits in 2011-2012. - A history of manipulation in the paper markets. There's a lot more to it than the above points, but they're some great bread crumbs towards further investigation. Manipulation aside, Silver stands up on it's own through strong supply and demand fundamentals. Demand for investment grade Bullion has gone from 50 million Oz's in the 90's and early 2000's to 200+ Mozs since 2008. The market couldn't handle a doubling of investment demand, let alone a rise in industrial demand for extended periods. Above ground stockpiles are at an extreme low and byproduct mining will begin to decline significantly once we reach peak copper, lead and zinc (and gold), which is forecasted to hit between 2028-2032. I'm certainly not into silver because I believe the market is manipulated. Silver makes sense to me from a long-term savings perspective. Silver is potential, opportunity and security wrapped into a neat little package and the fundamentals are extremely strong when looking into the 2030's and beyond.
I would argue that without compelling evidence one cannot reach a logical conclusion. But anyway. For me it would be the industrial demand that would be the kicker because silver is a commodity and industrial use outweighs investment demand by over 3:1, though of course you are correct that the supplies couldn't handle a doubling in demand, what would trigger that is another matter because even in the face of rising investment demand the POS has still fallen for periods of time. The Silver Institute's reports contain some potential future industrial uses that could trigger price rises in the commodity. Then again, this could get offset by advances in mining and production. It doesn't appeal to me as a means of protecting my purchasing power ie a form of long-time savings because the POS doesn't seem to have any meaningful correlation to macroeconomic conditions over time.
My choice of wording may not have been the greatest, but I'm sure you know what I meant. Emotions move markets and if the right conditions were met, it wouldn't take much to double investment demand in dollar terms. The overall silver market is small, but the investment grade Bullion (IGB) market is even smaller. It has it's own supply limitations. The biggest limitation is the supply bottleneck that occurs due to minting capacity. The IGB market could diverge considerably from the spot price and overall markets via premiums. We've had a taste of this in the last two years. It all just adds to the overall potential for Silver. Industrial demand has been slowly trending upwards over the decades. It's typically not an emotionally driven market (although supply shortages would change that). But I do agree that it offers more reliable potential in the long-term. I certainly wouldn't bank on IGB demand to take silver to new heights. Although, I do have a whole lot of tickets to that show if it ever comes to town. I think there's an explanation for that. Mostly what has been outlined in my previous comments re: manipulation. As above, but I'll also add that it takes my savings off the table and I don't account for it as "accessible funds". I get retail therapy when I buy it and it prevents me from spending my hard earned money on impulse (something I'm apparently great at doing). It just ticks all the boxes for me and I feel content with my choices and reasons. It's not for everyone though. Having realistic expectations is key to being in this space IMO.
