HISTORY OF SILVER : THE METAL OF THE MOON ( PART I AND II) / SEEKING ALPHA

History of Silver : the Metal of the Moon

Written by Jeff Nielson

Wednesday, 10 June 2009 09:02

This is the start of a three-part series. Part I discusses the dawn of silver mining and the recognition of silver as a precious metal – and “money”. Part II looks at the gradual build-up of global silver stockpiles over a period of centuries, while Part III looks at the rapid depletion of those stockpiles.

Somewhere around 5,000 years ago, humanity began to master the process of extracting “precious” metals from ore. According to the Silver Institute, the first “sophisticated processing” of silver occurred with an ancient tribe known as the Chaldeans – at approximately 2500 B.C.


There were several properties of gold and silver which attracted our primitive ancestors. First, there was the aesthetic beauty of these metals.

Secondly, these two metals were particularly malleable – making them ideally suited for a wide range of artistic and ornamental uses.
Finally, these two metals were scarce (or “precious”), but not so scarce that it was impossible to amass large quantities of these metals. It was these considerations which soon led to gold and silver becoming the first universally accepted “money” to have been devised by our species (and today they stand out as being the best forms of money ever devised by humanity).

Glittering gold was equated with being “the metal of the Sun”, while shining silver was considered “the metal of the Moon”. Thus, our “primitive” ancestors quickly established the first gold/silver price ratio. Each year, there were thirteen cycles of the moon for each full, cycle of the sun, thus the original price ratio between these two, precious metals was 13:1.

Science has subsequently determined that silver is approximately 17 times as plentiful in the Earth's crust. Therefore, our early ancestors either stumbled upon a ratio that just happened to coincide very closely with the natural abundance of these metals, or they had a much more sophisticated understanding of geology than we give them credit for. For roughly 4,000 years, the average gold/silver ratio was 15:1.

These ratios are especially interesting today, given that the price ratio is currently, extremely skewed in gold's favor – at more than 60:1.

For roughly two thousand years, the center of silver production was the “Cradle of Civilization”: the various ascending (and descending) cultures which were located around the perimeter of the Mediterranean Sea.

A thriving, silver trade among these tribes developed, reaching its zenith some time after the 8th century, B.C. Most of this early, silver production came from the Larium mines – located near the ancient capital of Athens. Annual silver production in this era was estimated at about one million ounces per year.

As the mines of Larium were gradually depleted, ancient production shifted its focus to newly-discovered silver deposits in Spain. For the next 1,000 years (until roughly 800 A.D.), Spain became the leading source of silver in the world.

With production of the earlier mines steadily declining, the production from Spain did little more than offset lower production from the Larium mines, and the handful of other, early sources of silver. Thus, total production leveled off at a plateau of approximately 1.5 million ounces per year.

While silver was never equated with gold in value (due to its greater abundance), throughout the first 2500 years of silver production its status as “money” never diminished. This is yet another piece of data to “file away”, given that the majority of market commentators today (especially in North America) disparagingly refer to silver as simply an “industrial metal”.
The “logic” of these neo-“experts” is that because silver also has superior chemical and metallurgical properties in countless applications (in addition to its aesthetic beauty) that this somehow makes silver less “precious”.

Such infantile reasoning would never have fooled our ancestors who lived a thousand years ago (or 2,000 years ago, or 3,000 years ago, or 4,000 years ago...). In fact, with most of the global stockpiles accumulated over a period of 4,000 years now consumed (literally) in various “industrial” applications, silver has literally never been more “precious” than it is today.

In Part II, I will provide an outline of the development of silver mining, and the huge growth of global, silver stockpiles which accompanied such production-growth – and which ended in the last century, when modern technology came up with an endless list of new applications for silver.

As humanity entered the “Middle Ages”, production of silver had been hampered by two constraints: the lack of new deposits/mines to offset the depleted reserves of older “First World” mines, and the primitive technology of that era – which made only rich, near-surface deposits feasible to mine.

Concurrently, two changes occurred, which allowed a dramatic increase in the amount of silver produced in the world. First, in the 15th century, the Americas were “discovered” (a very large historical “slight” to the indigenous peoples of these continents, along with the Nordic explorers who had reached North America centuries earlier).

Nevertheless, it was the highly-publicized expeditions of 15th century explorers (and those who came after them) which allowed the economic “development” of the Americas (i.e. the exploitation of their vast wealth of natural resources). Among the most-highly prized resources of the “New World” were precious metals.

Meanwhile, with science emerging from the Dark Ages, improvements in mining technology allowed a vast expansion in the production of silver and other metals. Bolivia was the first New World target for silver mining. According to data from the Silver Institute, between 1500 – 1800 A.D. somewhere around 1 billion ounces of silver were extracted there.

However, while Bolivia was the initial destination in the Americas for silver mining, Mexico soon became the largest silver producer. Over the same time frame, there was an estimated 1.5 billion ounces of silver produced in Mexico, with the majority of that production occurring in a single century: from 1700 – 1800.

The third, principal producer in the New World was Peru. Silver mining in Peru did not commence until significantly later than in Bolivia or Mexico. However, by 1600 it is estimated that annual production in Peru had reached roughly 3 million ounces per year, with more than half a billion ounces extracted by 1800.

To provide some perspective as to how important these new centers of silver production were, from a global perspective, between 1500 and 1800 these three New World producers accounted for roughly 85% of the global silver trade – despite the fact that in 1500, silver production was just beginning there.

By 1800, silver production was moving north – into the United States. Large deposits were discovered in the United States, most notably the “Comstock Lode” in Nevada. With these new mining capitals providing vast quantities of ore for miners, and with the steady improvement in mining methods and technologies, global production continued to rise. By the latter half of the 1800's, annual production fell somewhere between 40 to 80 million ounces per year.

Naturally, gold mining and the global production of gold followed a similar trajectory to that of silver mining (but that's a whole story unto itself), and large stockpiles of gold and silver were accumulated in the form of jewelry and other ornamental applications (in the hands of private entities), and large inventories of bullion (held by governments) – which formed the basis of our global monetary system (in an era when people actually possessed real “money”).

Throughout this era, the amount of mined and refined metal continued to increase even faster than global population growth. This continued on into the early part of the 20th century. And then things changed!!

In our own modern era, rapidly evolving technology and mass-production of an enormous array of goods altered silver's value in our society from being only a precious metal (and “money”) to becoming an ever more important “industrial metal”.

Noted silver researcher and commentator, Ted Butler, provides us with some information as to how huge those global stockpiles were, at their peak (in “A good time to buy Silver”): “In 1959, there were about 9 billion ounces of silver bullion-equivalent in the world population of 3 billion...a per capita amount of 3 ounces for each of the world's citizens...”

In just 50 years since then, these numbers have changed enormously. The paradigm where silver production produced global stockpiles of silver which continually rose faster than our global population ended – permanently. This was a market trend which had been intact for over 2,000 years.

To find out how dramatically this trend has been altered (and reversed), you will have to read Part III (or do your own research!). In the conclusion of this series, you will see why “silver bulls” are so rabidly enthusiastic about the future – for those who are buying silver bullion products (real bullion – not “paper promises”), and accumulating positions in quality silver miners now.

Gold may seem to shine brighter for most people looking at precious metals investments today. However, the Metal of the Moon is poised to “eclipse” the Metal of the Sun in the future, and most likely, the very near future. When that day arrives, silver will completely shed its label as “poor man's gold”.