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Adventures in Buying a CCT Silver Slide

Adventures in Buying a CCT Silver Slide

One of the quirks of alternative investing is that you end up researching some pretty strange things.  For example, I recently embarked on a silver bullion buying spree.  But that isn’t the unusual part of my story.  The weird part is what I stumbled upon when I looked for a simple and reliable silver counterfeit detection method.  I discovered a device called the CCT silver slide.

 

What is a CCT silver slide?

Simply put, a CCT silver slide is a quick and easy way to test silver bars and coins for fakes or counterfeits.  The bullion market has been hit by an absolute flood of counterfeit Chinese silver coins and bars over the past decade.  The worst part of this plague is that China’s manufacturing prowess has allowed it to make increasingly sophisticated fakes, some of which are impossible to distinguish from genuine pieces by looks alone.

Almost every bullion piece you can imagine has been imitated by the Chinese, including very popular products such as American silver eagles, Australian Perth Mint products and Sunshine Minting silver bars.  So having an effective way to weed out counterfeit silver is absolutely vital for the precious metal stacker.

 

How does a CCT silver slide work?

The device works on the twin principals of diamagnetism and electrical conductivity.  These create an effect known as the eddy current brake.  If you place a very strong magnet on an inclined silver surface, it will only slide down it very slowly.  Likewise, a silver coin placed on a large, inclined magnet will also slide quite slowly.  Most other metals will not behave this way, even if they are plated with a layer of pure silver.  Ferrous metals will stick to the magnet while cupro-nickel, brass and zinc alloys will descend quickly, with little or no hesitation.

This video gives a good demonstration of a CCT silver slide in action:

 

 

My adventures in buying a CCT silver slide

My story begins a few months ago when I began expanding my silver holdings.  Even though I was buying from reputable dealers, I soon realized that it would be wise to spend some money on diagnostic equipment.  Once I discovered the simplicity and usefulness of a CCT silver slide, I knew I had to have one.

Now this is where things got interesting.  CCT is an acronym that stands for “Cyber Curtain Twitcher”, a pseudonym for a gentleman silver stacker who resides in the United Kingdom.  This colorful man has an unusual YouTube channel where he and an assistant torture and destroy counterfeit coins in a myriad of gruesome ways.  I found his quirky brand of humor to be quite entertaining.

CCT is the personal creator of each and every one of his eponymous silver slides.  Yes, there are other silver slides currently on the market.  But to the best of my knowledge, Cyber Curtain Twitcher was the very first person to conceive of the silver slide idea as a simple, non-destructive testing method to distinguish fake silver coins from genuine ones.  He also constructs his slides to much higher standards than his competitors (which is obvious if you read through the build quality section further down in this article).

I wanted the best of the best – an original CCT silver slide.

 

2025 Update

CCT now offers his eponymous silver slides for sale directly via eBay!  I have a link to his products towards the bottom on this article.  This supersedes the section of the article I wrote below, but I’ve left it in for historical accuracy.

 

However, CCT has no dedicated website or formal sales platform for his product.  In addition, there was only one way to contact the man – through the comments section of his YouTube channel.  When I did, he informed me that the U.S. distribution of his slides is exclusively handled by an associate named “Mr. Vegiita” (another pseudonym, of course).

At this point, things began feeling a little cloak and dagger.

Apparently the only way to get in touch with Mr. Vegiita is also through his YouTube channel comments.  When I contacted him this way, Mr. Vegiita informed me that as soon as he received a slide shipment from CCT, he would post a video advertising them for sale.  I just needed to post my comment requesting a slide below one of those videos.

Then the waiting game began.

About a week later, Mr. Vegiita finally uploaded a video stating that some slides were available.  Unfortunately, my YouTube notification didn’t get pushed through, so I was a bit slow in discovering this.  I rushed to Mr. Vegiita’s YouTube channel and left my comment, only to discover that I was too late!  All of the slides had been sold out in the 24 hours since he had posted the video.

But I would not be denied.

Mr. Vegiita offered to put me on a waiting list – a proposal that I readily agreed to.  After waiting a couple more weeks, I received a notification letting me know he had just gotten a few more silver slides in stock in my choice of oak, utile or idigbo hardwood at $80 each on a first come, first served basis.  I sent him the money via PayPal before I even found out if my preferred wood was still available in the desperate hope that shoving the cash into his hands (shut up and take my money!) would obligate him to deliver me something.

Luckily, the utile wood version I wanted was still up for grabs!  Utile, otherwise known as Sipo Mahogany, is an African tropical hardwood exported primarily from Cameroon, Ghana and Congo.  Utile is a beautiful, dark reddish-brown color with a pronounced grain pattern that looks a lot like Honduran Mahogany.  This is because Sipo Mahogany is actually a distant relative of the Swietenia (true mahogany) genus.

Mr. Vegiita was a man of his word and promptly mailed my slide, which I received just a few days later.

I had finally got hold of an elusive CCT silver slide!  And it was everything I dreamed it would be.  But that isn’t surprising considering the attention to detail that Cyber Curtain Twitcher puts into every slide.

 

CCT silver slide build quality

CCT handcrafts his silver slides from a variety of fine temperate and tropical hardwoods in his UK workshop.  The slide portion is constructed from a series of ultra-high strength rare earth magnets laid in parallel.

These N52 neodymium magnets are the most powerful commercially available magnets in the world.  In fact, they are so powerful that people with pacemakers are advised to handle the CCT silver slide (or any other product that contains rare earth magnets) with care, because its magnetic field could potentially disrupt an implanted cardiac device.

CCT then adds a soft felt layer over the magnets so that your bullion won’t get scratched as it slides down the ramp.  He finishes the wood frame with a durable, yet attractive 5-coat melamine lacquer finish.  Finally, he laser engraves a logo on the back that reads “CCT Silver Slide” to brand it as one of his handmade originals.

 

CCT Silver Slides for Sale on eBay

(This is an affiliate link for which I may be compensated)

 

The limitations of a CCT silver slide

Of course, no single precious metal counterfeit detection method is foolproof.  And the CCT silver slide is no exception to this rule.  A silver-plated slug of pure copper (which is also diamagnetic and highly conductive) will slide down a rare earth magnet ramp in much the same way as a real silver coin.  Pure gold will also behave like pure silver, although this is generally a non-issue because no one would bother to counterfeit a low-value silver coin by silver plating a much more expensive gold coin.

A CCT silver slide also can’t readily distinguish between silver coins of different finenesses.  Although a coin or bar of lower silver content should traverse the slide almost imperceptibly faster than a higher purity one, you would need a stopwatch to have any hope of telling the difference.  In effect, a 50% or 80% silver coin will behave very similarly to a 90% or 99.9% silver coin (especially if the alloying metal is copper).

In addition, a silver coin struck in very high relief will slide down the ramp faster than expected because there is less surface area in direct contact with the magnets.  Therefore the eddy current braking effect does not have an opportunity to fully engage.

And while a CCT silver slide is the perfect size for testing fractional silver and 1 troy ounce coins and bars, it won’t work well on larger silver bullion.  Yes, it can accommodate 2 troy ounce bars and rounds, but once you get much larger than that you are better off using a small, button-shaped rare earth magnet directly on the test item’s surface.

Because of these (admittedly minor) drawbacks I advise every silver stacker to use at least two different counterfeit detection methods when buying silver bullion.  The ping test, weight test, density test and acid test are all viable alternatives.  A CCT silver slide combined with one of these other, complementary tests will eliminate practically every fake silver coin or bar that you might encounter.

On the whole, I would highly recommend an original CCT silver slide (or, barring that, a small rare earth magnet) to anyone interested in purchasing silver bullion.  CCT – that mysterious silver stacker from the United Kingdom – makes a great product at a great price point.  The money you save avoiding fake silver is well worth the cost.

 

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3 Vintage Wristwatches That Are Better Than a Savings Account

3 Vintage Wristwatches That Are Better Than a Savings Account

There’s an old British financial saying: “safe as houses”.  It means that a financial endeavor is risk free, or nearly so.  Of course, anyone who lived through the 2008-2009 housing crisis in the U.S. might take issue with this wisdom.  Before that debacle, U.S. housing prices hadn’t declined on a nationwide basis since the Great Depression in the 1930s.

It sort of makes it tough to take the adage seriously.

But maybe we don’t need to abandon the maxim, so much as update it for the modern age.  After all, houses are tangible assets, and I strongly suspect that assets you can touch, hold and keep in your physical possession will do surprisingly well in the years to come.  But if houses, which have shown vulnerability in the face of widespread property bubbles, aren’t the tangible asset to own, then what is?

Here’s my working theory.  Maybe vintage watches are the place to stow a bit of your hard-earned money instead of a stodgy old savings account.

Many people might be surprised by this bit of unconventional investment wisdom.  After all, a savings account has traditionally been one of the safest places a person can keep his excess cash.  So why in the world would I think that vintage watches would be better?

Well, financial risk can come in many different dimensions.  For example, with a savings account there is the risk that your bank will go bust and be unable to pay back your deposit.  In these instances, a national bank insurance fund (like the FDIC in the U.S.) will usually pick up the slack, making good on deposits up until a predetermined monetary limit.

So no, I don’t expect many people to lose money in failing banks.  After the 2008-2009 financial crisis, regulators demanded that banks in the U.S. maintain far higher reserve levels than they had previously.  So even in another financial crisis, I find it unlikely that many U.S. banks would fail.

No promises if you live in Europe, though, where your banks are levered to the moon!  In this instance, you might well find yourself relying on the tender mercies of your financial regulators or politicians to ensure that you are made whole.

However, there is another major risk when you place your money in a savings account – inflation.  Inflation gradually erodes the purchasing power of any cash or deposits, including savings accounts.  Now under most circumstances, your bank will pay you interest to offset this inflationary loss, along with just a little bit more so that your account gains value in real (inflation-adjusted) terms.

Unfortunately, we don’t live in normal times.  Instead, we live in an era of financial repression, where bank regulators use depositors as a tool to recapitalize the national banking system.  This comes in the form of bank deposit rates on your savings account that are below the prevailing rate of inflation.

Every month your money stays on deposit in your savings account, you lose just a little bit of purchasing power.  This lost purchasing power is happily vacuumed up by your local bank so that it can keep on doing whatever it is that banks do (which seems to be crashing the global economy about once every ten years, as far as I can tell).

But vintage wristwatches give you a safe, tangible asset that you can hold in your hands (or wear on your wrist)!  The market for vintage watches has been going from strength to strength over the past decade, and I believe this trend is likely to continue.  The possibility of loss is very low, assuming you choose high quality watches and pay a fair price for them.

So the question then becomes: can carefully selected vintage wristwatches outperform the return you expect to get on your savings account?

Now, I will admit I am a bit of a pessimist when it comes to bank deposit rates.  In most developed nations, short-term interest rates (like the kind banks pay on deposits) are embarrassingly low right now.

For instance, the European Central Bank is keeping short-term rates pegged at 0.25%, the Bank of England is holding them at 0.75% and the Bank of Japan is satisfied with a miserly -0.1%.  Only the U.S. Federal Reserve has managed to decisively move off the zero bound with a current range of 2.25% to 2.50%.

These rates are unlikely to get too much higher before we enter another synchronized global recession.  Central banks will react to this development by driving short-term interest rates down to zero (or possibly below).  At that point, even a lowly 1.0% annual interest rate on your savings account will seem like a sweet, distant dream.

But let’s generously assume, for the sake of argument, that you can score an average 1.0% return on your savings account over the next 10 years.  This means that if you park $10,000 in your bank today, it would grow to $11,046 over the next decade.

I’m going to be blunt here.  The vintage watches I list below will almost certainly beat this return, and most likely handily.  I think these 3 categories of vintage watches could easily achieve an annual appreciation of 2.5% to 5.0% over the same timeframe.  This would transmute your $10,000 stash into anywhere between $12,801 and $16,289 over 10 years – an increase over our theoretical low-interest savings account of $1,395 to $4,883.

And who couldn’t use an extra $2,000 or $3,000?

So what are these magical, better than savings account watches?  I have a few unusual choices in mind.

 

1) Vintage Rolex Oysterquartz Watches

Everyone has heard of Rolex watches – even people who don’t know anything about vintage wristwatches.  Rolex makes beautiful, robust and thoroughly desirable luxury watches.

But did you know that there is a Rolex watch that nobody talks about?  Yes, it’s true!  Shockingly, there is a type of vintage Rolex that is completely overlooked in today’s secondary market.  I’m speaking about the Rolex Oysterquartz series, which was produced from 1977 until 2001.

Many collectors ignore these horological treasures because, as the name implies, they have quartz movements.  But an Oysterquartz is no ordinary quartz movement.  It is an in-house, high-end, super-accurate quartz movement that Rolex laboriously developed over many years of research and testing.  Better yet, it is estimated that only 25,000 of these unique quartz movements were ever created, making them far rarer than many other Rolex calibers.

Although I don’t believe that most vintage quartz wristwatches make good investments, Rolex Oysterquartz watches are a clear exception to this rule.

I think it is inevitable that the long neglected Oysterquartz will one day be recognized for the gem it is, driving prices up.  But until then, you can get Rolex Oysterquartz wristwatches in stainless steel or two-tone cases for just $3,000 to $5,000.  This is substantially less than what similar Rolexes with mechanical movements go for.

 

2) 14K & 18K Solid Gold Dress Watches from the 1960s and 1970s

I also like vintage, solid 14 and 18 karat gold dress watches from the 1960 and 1970s.  These classic timepieces were produced by the leading Swiss watch companies of the time, such as Audemars Piguet, Omega, IWC, Longines and Vacheron Constantin.

Vintage gold dress watches simply drip with aesthetic flair and Mad Men zeitgeist.  And, of course, they all sport finely finished, fully jeweled mechanical movements that are works of art in their own right.

Yet prices are still unbelievably low for these enchanting vintage watches, probably because gold dress watches are out of style right now.  Some of the rarer models from the most esteemed makers might run you $3,000 or $4,000.  Slightly more common, but still desirable specimens can be found as low as $2,000, or even a bit less!  That represents a remarkably good alternative for your extra cash compared to parking it in a low-interest savings account.

I recently featured a stunning 18K gold IWC men’s watch from the 1960s in one of my Spotlight posts.  It was unbelievably inexpensive at only $1,720, and sold quite quickly.  But there are many other bargains to be had in this segment of the vintage watch market.

 

3) Vintage Must de Cartier Tank Watches

Cartier is famous for their iconic, rectangular tank wristwatches.  But the prices for these covetable luxury timepieces can be mind-numbingly high.

Luckily, Cartier produced a line of elegant, entry-level luxury tank watches between 1977 and the mid 2000s under the Must de Cartier nameplate.  They were made from vermeil, which is solid sterling silver coated in a generous, 20 micron thick layer of gold.  In addition, the discerning watch enthusiast can choose between high quality manual wind or quartz movements.

Stylish Must de Cartier tank wristwatches perfectly straddle the fine line between avant-garde fashion watch and traditional luxury timepiece.

But the best thing about these perennially popular watches is their price.  Specimens in good-to-mint condition can generally be found in the $800 to $1,800 range, meaning that even a horological aficionado with a beer budget can afford to own a genuine Cartier Tank.

 

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Sidestepping the Coming Pension Crisis

Sidestepping the Coming Pension Crisis

An enormous pension crisis is coming our way.  And it is likely to cause a seismic shift in how we view saving and investing.

I generally consider that to be a positive development.  However, the way we get there is bound to be ugly.  At this moment the looming pension crisis is like a distant storm on the horizon.  Many people know that it will arrive at some point.  Some even believe that it will be bad.

But few truly understand the magnitude of the pension disaster to come.

A pension is just a fancy way of saying that a company, financial institution or government will cut you a monthly check for the rest of your life once you reach retirement age.  Almost all pension plans manage large pools of assets that are used to pay out these benefits.  Under normal circumstances, these assets (usually stocks and bonds) grow in value over time, allowing the pension plan to keep up with its obligations.  This is referred to as being “fully funded”.

So far, so good, right?  Unfortunately, we aren’t living in financially normal times.  You see, many of the assets contained in pension plans these days are rather questionable.

For example, I recently read an article by financial commentator Wolf Richter titled “This Deal Shows How the Junk-Credit Market is Still Irrationally Exuberant“.  It details the sad story of a company called Asurion, which is borrowing $3.75 billion in the capital markets.

The problem is that Asurion is already highly levered.  It is rated B1 by Moody’s, which is deep in junk territory.  Furthermore, Moody’s considers the company’s borrowing binge to be “credit negative” – code for the strong possibility that it will downgrade Asurion in the near future.

The bad news doesn’t end there, though.  Asurion will not use the proceeds from the new debt to expand its business or buy another company.  Instead, it will use the entire $3.75 billion to issue a special dividend to its partial owner, a private equity firm.

If this sounds bad, it is because it is.  Asurion is already neck deep in debt.  Taking on more debt will not improve its chances for long-term survival.

But this is where things get interesting.  Asurion isn’t 100% owned by the private equity company mentioned above.  Instead, the private equity firm has cut some other “investors” (read: bag-holders) in on owning Asurion.  One of those investors just happens to be the Canadian Pension Plan Investment Board, which manages the Canadian equivalent of Social Security in the United States.

Oh, and Asurion’s business is selling extended warranties on cell phones, consumer electronics and home appliances – a superfluous service if ever there was one!

So here is what is going to happen.  In the next recession, the inevitable will occur and Asurion will go bankrupt.  The unfortunate equity owners (like the Canadian Pension Plan – indirectly the Canadian people) will get a goose egg.  Any holders of Asurion debt (mutual funds, other pension plans, etc.) will take a massive haircut, getting pennies on the dollar.

Oh, and if there is a God in heaven, Asurion will hopefully be liquidated in its bankruptcy, if for no other reason than so we can’t go through this demented financial rollercoaster again at some future date.

Now Asurion’s grim situation isn’t a one-off.  The corporate world has been borrowing hand-over-fist for the better part of a decade now.  When the financial storm finally hits, it will be unbelievably intense.

And regular people expecting their pension payouts will be at the center of this default hurricane.  And this doesn’t just apply to the minority of the population that still gets a defined-benefit pension from their private employer.  It is also going to hit millions of pension holders who work (or used to work) for state and local governments.

Even social security beneficiaries (which include nearly every American citizen over the age of 65) will feel the pinch of the pension crisis.  According to the Social Security Administration’s 2018 report, the Social Security Trust Fund will be fully depleted in 2034.

But once the looming pension crisis smashes into the economy, you can expect this drop dead date to arrive far sooner than anyone expects.  This is because the cratering economy will bleed a lot of jobs, driving down payroll tax collections that would have been used to fill the Trust Fund.  At that point, absent a substantial increase in payroll tax rates, Social Security will only be able to pay out 75% of its scheduled benefits.

And that brings us to the real crux of this article – how you can avoid the coming pension crisis.

I would direct your attention to the photo at the top of this post.  It shows a 5 troy ounce vintage silver bullion bar that I recently purchased from Etsy.  This classic, loaf-shaped bar is undoubtedly an older ingot from the 1960s.  In fact, it is possible that the “64” stamped on the lower left-hand corner of the bar is actually the last two digits of its date of manufacture – 1964.

If this is the case, this vintage silver bar would have been equivalent to almost $6.50 in U.S. silver certificates (before they ceased being convertible in 1968).

But the greatest thing about this beautiful vintage silver bar was its price – a mere $110, including shipping!

I find it amazing that you can still pick up gorgeous and desirable hard assets like this for so little money, while the financial “professionals” chase treacherous junk bonds.  $110 is less than the price of one share of Facebook ($148), Alibaba ($152) or Boeing ($356) stock.  And it is less than the price of a single token of the Maker ($450), Ethereum ($119) or Bitcoin Cash ($130) crypto-currencies.  And unlike these dubious assets (or your monthly benefit check), hard assets won’t collapse in value in the coming pension crisis.

 

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Why Is Silver So Cheap? – A Historical Analysis

Why Is Silver So Cheap? - A Historical Analysis

Why is silver so cheap?  On an inflation-adjusted basis, the price of silver is comparable to the price of dirt right now.  It is a bizarre historical anomaly for a metal that has been treasured since the dawn of civilization.

The precious white metal’s current price is a far cry from how valuable it used to be.

For example, during the 1st century AD in the Roman Empire, one day’s skilled labor was equal to one silver denarius coin.  This was equivalent to about 3.9 grams (0.1254 troy ounces) of pure silver.

In late 14th century medieval England, a master carpenter earned one groat (4-pence) per day.  These coins weighed 4.66 grams of sterling silver, or 4.31 grams (0.1386 troy ounces) of fine silver.

A skilled construction worker in late 16th century Mughal India commanded a salary of 5.25 silver rupees a (lunar) month.  A Mughal rupee was a large coin containing 11.3 grams of nearly pure silver.  Assuming a 6 day work-week, this would translate into a daily wage of around 2.47 grams (0.0795 troy ounces) per diem.

Even as recently as the 1850s, a carpenter living in the United States would have only received a daily wage of somewhere around $1.50.  Because a silver dollar contained 24.06 grams of pure silver, this wage would have equaled 36.08 grams (1.1601 troy ounces) of fine silver per day.

Today we can conservatively expect a skilled worker to earn a minimum salary of $25 per hour, or $200 per day.  With silver currently bouncing around $16 a troy ounce, today’s skilled laborer earns a wage of 388 grams – 12.5 troy ounces – of silver every day!

This naturally leads to a very basic question.  Why is silver so cheap right now?

Another way to measure the historical price of silver is via the gold-silver ratio.  This calculates the price of one troy ounce of gold in terms of ounces of silver.

From the dawn of human history until the mid 19th century, this ratio never rose above 20 to 1.  It fluctuated from a low of 2.5 to 1 at the dawn of the Egyptian Empire in 3100 BC to a high of 16 to 1 throughout much of the 19th century.  It was 12.5 to 1 during the time of Roman Emperors.  In early 19th century Japan under the Tokugawa Shogunate, the ratio was 5 to 1.

Today the gold-silver ratio stands at 82 to 1.

So once again I’ll ask the question.  Why is silver so cheap?

If you look at how much silver is mined every year, the lunar-themed metal seems even rarer.  The global mine supply of silver has averaged 803.2 million troy ounces per annum over the past decade (2008 through 2017), while gold has averaged 89.4 million troy ounces over the same period.  This gives a gold-silver production ratio of about 9 to 1.

This doesn’t make any sense.  Why is silver so cheap?

 

American Silver Eagle Bullion Coins for Sale on eBay

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From a historical perspective, the price of silver only really collapsed about 150 years ago, starting around 1870.  And then the white precious metal’s situation went from bad to worse in the 20th century.  This culminated in silver’s price washout in the 1990s to early 2000s, when you could buy as much of the stuff as you wanted for a mind-blowingly low $5 an ounce!  This was most likely a unique historical event.

Even though you can no longer buy silver for $5 an ounce, it is still tremendously undervalued today.  In order to understand why silver is as cheap as dirt, we have to look back at a few key events in world history.

The first of these was demonetization – the discontinuance of silver as an official form of money.

Until the 1860s, many nations around the world were on silver standards or bimetallic gold-silver standards.  This manifested itself through the free coinage of silver, meaning that you could take unlimited quantities of silver bullion to your national mint and have it turned into legal tender silver coins (for a fee, of course).  So your silver bullion was, quite literally, money!

But the coup de grâce for the global silver standard came, rather unexpectedly, from the aftermath of the Franco-Prussian War.  Once the Prussian Army had crushed the French at the battle of Sedan in 1870, the victorious Germans demanded an indemnity of 5 billion gold francs from the defeated nation.  The French had no choice but to pay the exorbitant bribe, even though it amounted to a staggering 1,451 metric tonnes of gold.  As a point of reference, this is more gold than is currently held in the entire Swiss national gold reserves.

Prussia opportunistically used this golden windfall to switch its currency from the silver-backed German Thaler to the gold-backed German Mark.  However, because the major economic powers of Great Britain and France were already on gold standards, this Prussian monetary reform had an unintended side effect.

It fatally undermined the acceptability of all remaining silver-backed currencies in international trade, causing a domino effect.  As the price of silver fell throughout the 1870s, more countries (including the U.S.) were forced to switch to gold-backed currencies as silver-backed currencies collapsed in foreign exchange value.

At the same time, halfway around the world in the United States major silver mining discoveries were taking place.  The first of these was the famous Comstock Lode, located in Virginia City, Nevada.  This deposit produced massive quantities of silver from 1860 until the mid 1880s.

As the Comstock Lode’s production began to taper in the late 1870s, Leadville, Colorado replaced it as the United State’s premier silver boom town.  Mining there continued uninterrupted until the early 1890s.

Silver was also discovered in the Coeur d’Alene region of Idaho in the mid 1880s.  This area eventually became one of the most prolific silver deposits in the world, yielding more than a billion troy ounces of the precious metal to date. Silver is still mined in the Coeur d’Alene region today, over 130 years after its first commercial production.

These sizable silver discoveries ensured that prodigious supplies of the precious white metal flooded the global market for decade after decade, helping to drive its price down.

 

Hand Poured Silver Bars for Sale on eBay

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Another little-recognized factor that crippled silver prices was the commercial deployment of electrolytic refining in the late 19th and early 20th century.  Until that time, metal refining was a very imperfect process.  Copper, zinc, lead and other base metal ores often contained trace amounts of silver that couldn’t be profitably extracted using older, less efficient refining methods.

But at the dawn of the 20th century, electrolytic refining suddenly turned the metal mining industry on its head.  This new refining process used electricity to decompose a mixed-metal anode bar in an electrolyte solution and then reconstitute a pure, single-metal bar at the cathode.  This is an extremely efficient refining method that allowed for the recovery of effectively all trace metal impurities.

And while the percentage of silver contained in most base-metal ores is very small, the quantities involved become massive in aggregate.  The widespread adoption of electrolytic refining allowed the small quantities of silver that had previously been “locked-up” in base metals to be freed.

This was especially important because metals are generally recycled over time.  So as all the lead, copper, tin and zinc accumulated since Roman times was gradually recycled  over the course of many decades via electrolytic refining, a considerable amount of additional silver was recovered.  This extra supply largely hit the market in the early to mid 20th century.

In addition, the secondary production of silver extracted via electrolytic refining is price insensitive.  If you are a copper miner, you care primarily about the price of copper.  Any silver you get from the refining process is considered a by-product metal that you will sell into the spot market regardless of how low the price of silver might be at the time.

The next major event in the silver price timeline took place during the 1960s.  Although the white metal had been largely demonetized in the late 19th century, most countries still used silver for token coinage.  But when silver prices started to rise in the 1960s due to widespread inflation, all countries on earth quickly removed any remaining silver from their circulating coinage.  This process was largely complete by the early 1970s, resulting in silver being completely demonetized for the first time in human history.

The final insult came when national governments began to slowly dispose of their leftover silver stockpiles.  For example, the last of the U.S. Government’s strategic silver stockpile was sold off to the U.S. Treasury for the minting of U.S. Silver Eagle bullion coins in 2002.

Other nations enthusiastically followed suit.  Foreign governments and central banks were significant net sellers of silver from the 1980s until around 2010.  However, there have been almost no government sales of silver bullion stockpiles since that time.

At this point, I think it is fairly safe to assume that governments have no substantial silver reserves left.  This is in stark contrast to gold, which is still widely held as an important reserve asset by nearly all central banks around the globe.

So now we know why the price of silver has been so undervalued for the last 150 years.  But will it stay cheap forever?  Well, let’s examine the evidence.

Silver has already been completely demonetized.  So it is effectively impossible for its monetary demand to drop any lower.  Furthermore, there are no longer any meaningful government stockpiles of the metal (unlike with gold), so that potential supply overhang is gone.  No government can credibly pledge to sell physical silver in large enough quantities to suppress its price for long.

More or less all base metal ores are subject to electrolytic refining these days.  This means that there is more silver produced as a by-product of base metal mining than from primary silver mines.  But in spite of this fact, the gold-silver mining ratio is still only 9 to 1.  So the extra silver supply certainly doesn’t seem to adversely impact its rarity very much.

In addition, mining companies have been having an increasingly difficult time finding large, rich ore deposits, regardless of whether they are looking for base metals or precious metals.  Humanity has effectively high-graded the planet for several centuries now, always mining the richest ore bodies from the easiest to access locations.

All that is left are low-grade, geologically-complex ore bodies located in remote, politically unstable regions.  The idea that we will magically stumble across another Comstock Lode or Coeur d’Alene bonanza chock full of high-grade silver ore borders on the ludicrous.

 

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My analysis is pretty straightforward.  Silver is insanely undervalued at any price below $20 an ounce.  The current gold-silver ratio of 82 to 1 is egregiously high and represents little downside risk for silver investors.

The upside is that silver might one day revert to its traditional value.  If one day’s skilled wage was to once again become equal to a single troy ounce of silver, it would imply a silver price of at least $200 per ounce.  Anything even close to this result would enrich silver stackers beyond their wildest dreams.

However, I feel it is important to note that I don’t think the price of silver will skyrocket while the global securities market bubble is still in play.  As a bedrock tangible asset, silver is the antithesis of the paper asset casino that currently dominates the marketplace.

In other words, silver will only rise dramatically in price if it is either partially or completely remonetized.  And remonetization will only be possible once our grotesque paper asset bubble has definitively (and messily) popped.

So I’ve got good news and bad news for you.  The good news is that I think you have a little more time to get in on this stunningly undervalued monetary metal.  The bad news is that one day when we least expect it, this marvelous bargain will be gone.

 

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