CRA Silver Report

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Charles River Associates
Study Conducted For The Silver Institute

Stocks Of Silver Around The World

Overall Conclusions

Thus, based on this study, CRA concludes that even though the aboveground stocks of silver in various forms are large, they are not readily available to the market. Only a small portion of the worldwide stocks are potentially available to the market under realistic set of market conditions, as summarized in Table 8-3 and Figures 8-11, 8-12, 8-13, and 8-14 47


Table 8-3. Summary of CRA Estimates of Silver Stocks and their Liquidity
(Total World; Year-end 1991; Millions of Troy Ounces)

Stocks Potentially Available 1, 2 to the
Market if Silver Price Were to Be:
Stocks Unavailable
to the Market 3
Total Unavailable
and
Available Stocks
< $5
$10
$15
$20
Bullion
67
236
482
744
652
1,396
Coins and Medallions
25
154
2,332
321
857
1,178
Total - Conventional Definition
92
390
714
1,065
1,509
2,574
Silverware and Art Forms
54
151
434
1,143
15,338
16,481
Total - Broad Definition
146
541
1,148
2,208
16,847
19,055
1  Numbers below are not annual flows, but rather total stock that is potentially available.
2  Total potential outflow from stocks potentially available is not immediate but rather available in increments over
many years if silver prices persisted at these levels.
3  Under any set of foreseeable realistic market conditions.
SOURCE: Charles River Associates, 1992.


As shown, CRA estimates that total aboveground stocks of silver in its three principal forms are about 1.4 billion troy ounces of Bullion, 1.2 billion troy ounces of coin plus medallions and 16.5 billion troy ounces of silverware and art forms. Western Europe has the largest share of these total stocks (bullion, coins,.silverware, and art forms).

However, as shown, only about 541 million troy ounces of these total stocks, is potentially available to flow into the market at less than or equal to $10 per troy ounce silver. Further, such potential outflow is unlikely to be immediate and would occur only in increments over a span of years if silver prices prevailed at these levels. Thus, even though the total stock in all forms is 19.1 billion troy ounces, for all practical purposes the "truly available relevant stocks" are:
 

  • 146 million troy ounces at $5 per troy ounce silver,
  • 541 million troy ounces at $10 per troy ounce silver,
  • 1,148 million troy ounces at $15 per troy ounce silver, and
  • 2,208 million troy ounces at $20 per troy ounce silver,


The principal reasons why the "truly available stocks" are significantly smaller than the total stocks in all forms are:

  • Investor stocks of bullion, at 524 million troy ounces, that are less than 40 percent of the total bullion stocks held worldwide. A majority of bullion stocks are held largely as business stocks required for the conduct of commerce. These business stocks historically have been relatively stable and, as such, not "available" to the market except at very high silver prices, and even then on a transient basis only.
  • A majority of coins and medallions are held either for their numismatic/collectible value or held as small holdings in families; leaving only a smaller portion (231 million troy ounces) as more price responsive and available to the market.
  • The majority of silverware and art forms of silver is not available under normal market conditions largely because of the possessiveness or emotional value attached to these holdings.
The common perception in the market that silver stocks are very large and thus readily available is wrong. The stocks are large but are not all readily available, as explained above. It is easy to see, with hindsight of this study, why there is this confusion in the marketplace:
 
  • It is difficult for market participants on a day-to-day basis to separate physical silver from "paper silver" involved in numerous transactions;
  • The high velocity and volume - particularly of "paper silver" - passing among dealers, traders, miners, refiners, users, fabricators, and investors swamps reality, creates the wrong perception that the volume of "physical silver" traded is high;
  • It is almost impossible for the market participants to distinguish daily the physical bullion held for investment versus that which is held for business stocks required for the conduct of commerce. This is made even more difficult in that Western Europe has more investor stocks whereas the United States has more business stocks; and
  • The evolution and growth of various exchanges, especially the COMEX, and the increasing tendency to lease-finance silver in the industry have over the last 20 years made the business stocks of silver more visible than they were historically. This has occurred simultaneously, without any recognition that there is a real distinction between business stocks and investor stocks of silver bullion.


It is not an objective within the scope of the study to estimate the effect of these stocks (real and perceived) on the world silver market. However, it is worth observing that the level of investor stocks of silver bullion (524 million troy ounces) is such that it is likely to last for significantly less years than is commonly believed, assuming the recent (1990, 1991, 1992) trend of consumption-exceeding-mine-supply-plus-scrap continues. Thus, it appears to us that, at least to some long-term investors, the expected long-run equilibrium price of silver is high enough for them to hold silver at today's prices and meet their cost of storage.

Finally, and most importantly, CRA wants to sincerely thank the numerous individuals, organizations, and companies that cooperated and helped us with this independent study. We have promised you full anonymity, and we shall respect this promise. Thus, we take the unusual step of not thanking anybody by name, so that we can protect the interests of all. We hope this study helps the world silver market and industry cope with the uncertainties and vagaries of this volatile market.


    Figure 8-11

CRA ESTIMATES OF SILVER BULLION STOCKS UNAVAILABLE AND
POTENTIALLY AVAILABLE TO THE MARKET AT VARIOUS SILVER PRICES
(Per Troy Ounce)

 

    Figure 8-12

CRA ESTIMATES OF SILVER COIN AND MEDALLION STOCKS UNAVAILABLE
AND POTENTIALLY AVAILABLE TO THE MARKET AT VARIOUS SILVER PRICES
(Per Troy Ounce)

 

    Figure 8-13

CRA ESTIMATES OF SILVERWARE AND ART FORM SILVER STOCKS UNAVAILABLE
AND POTENTIALLY AVAILABLE TO THE MARKET AT VARIOUS SILVER PRICES
(Per Troy Ounce)

 

    Figure 8-14

CRA ESTIMATES OF TOTAL SILVER STOCKS 1, 2, 3 UNAVAILABLE
AND POTENTIALLY AVAILABLE TO THE MARKET AT VARIOUS SILVER PRICES
  • 1 Number below are not annual flows, but rather total stock is potentially available.
  • 2 Total potential outflow from stocks potentially available is not immediate but rather available in increments over many years if silver prices persisted at these levels.
  • 3 Under any set of levels foreseeable realistic market conditions.



47  The CRA study involved numerous confidential interviews, analysis of many of the silver market data, and some
business judgments. In analyzing the data, we have endeavored to correct for numerous data errors that exist, but
obviously in a task of this magnitude, not all prevailing data errors can be screened out. We have a very high degree
of confidence in our bullion stock estimates, and a somewhat lower but still reasonably high - degree of
confidence in estimates of other types of stocks and losses.


Please Note:
This summary is the conclusion of the report which I would recommend viewers purchasing to gain a more indepth understanding of why the world won't be inundated with silver on higher prices. Indeed since this report's publication most all known stockpiles of silver have been exausted.
Nick
Stocks of Silver Around the World by Charles River Associates.
This study provides independent estimates of above ground stocks of silver by type, grade, and geographic region, plus an economic analysis of silver. Published 1992.

This report is available on order from The Silver Institute

-----------------------------------
Stocks of Silver Around the World
The overall objectives of this independent study researched and prepared for The Silver Institute by Charles River Associates Incorporated, are:

To estimate stocks of silver by type and geographical region, and
To estimate the liquidity if these stocks (i.e., prices and conditions under which these stocks would flow into the market.

Table of Contents:

  • 1. Summary
  • 2. Introduction
  • 3. Assessment of Historical World Mine Production
  • 4. Stocks of Bullion/Bars/Ingots as of Year-end 1991
  • 5. Silver Coinage and Medallion Stocks as of Year-end 1991
  • 6. Stocks of Silverware and Art Forms as of Year-end 1991
  • 7. Identifiable Irrecoverable Losses of Silver as of Year-end 1991
  • 8. Overall Conclusions


Appendix
Bibliography
Silver Consumption for Coinage: 1911-1990

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