Silver Stock Report
by Jason Hommel, January 17, 2008
It is often said by academics and economists that silver is so much less valuable than gold, because it is so much more bulky for an equal value of gold, and thus, it costs more to handle and ship, which, in turn, makes it less valuable than gold.
It’s a circular argument that doesn’t make much sense. Yes, I can see the argument, but it fails in reality.
David Morgan wrote an essay this month called “Good things come in Small Packages”, which utterly refutes the false notion that silver is “too bulky”. Silver is now more valuable, pound per pound, than the typical laptop computer, and silver takes up less space.
A few months ago, Antal E. Fekete stuck his foot in his mouth.
He wrote: “The monetary metal with the higher specific value is more portable both in space and time. In more details, the cost of transporting the unit of value as represented by gold is lower. For example, if the bimetallic ratio is 15, then the cost of transporting the unit of value as represented by silver is about 15 times higher.”
This “theory” implies that at a 90:1 price ratio, it would cost 90 times more to ship silver, than gold, due to the silver being 90 times heavier, given equal values.
He is wrong, probably because he has not actually shipped or purchased enough gold and silver to know the difference, and he is speaking “in theory.”
But in the real world, the cost to ship is not calculated merely by weight and/or bulk. Most of the cost to ship silver and gold, about 80% of the cost, is for the insurance, to insure against the loss of theft of it. And here’s how it breaks down, as follows:
To ship 100 oz. gold, requires 4 packages, because you can only insure so much at one time, not more than $25,000 worth. $45 each package.
Total cost to ship 100 oz. of gold = $45 x 4 = $180
To compare, it costs $20 to ship 100 oz. silver; $8 for the one box, and $12 for the insurance. Insurance is much less, due to the lower value.
Gold is 9 times more expensive than silver to ship, on an ounce per ounce basis at current prices, and more inconvenient, due to having to break down the packaging into 4 boxes.
But what about on an equivalent dollar basis, as Antal was saying?
What does it cost to ship $100,000 worth of silver verses $100,000 worth of gold?
In the real world, you can actually fit 7 silver bars in one bucket, to save on packaging costs.
7 silver bars x 6.8 pounds each (12 ounces per troy pound, 16 regular ounces per regular pound, but 14.6 troy ounces per regular pound) = 47.6 pounds, which is well under the 70 pound limit for the Post Office for heavy packages.
Each package of 7 bars costs about $65 each to ship.
5600 ounces / 700 ounces = 8 buckets.
8 buckets x $65 = $520 to ship, which is about half the cost of shipping each bar by itself.
$520 / $180 = 2.8! It costs 2.8 times more to ship an equal value of silver, compared to gold.
That is much less than 15, much less than 56, at the current 56:1 price ratio!!!
100 oz. gold x $876/oz. = $87,600, which costs $180 to ship. (Or .2 of 1%)
5600 oz. silver x $15.83 = $88,646, which costs $520 to ship. (Or .6 of 1%)
Silver costs about 2.8 times as much to ship, as gold, considering equal dollar amounts, and both can be shipped for much less than 1% of the cost of the metal itself.
Don’t let anyone hold your silver for you! Don’t let them use the false excuse that “It costs too much to ship”. Bull Ship!
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