Investment bankers spend many hours each week working through complex Excel spreadsheets monitoring the results of acquisitions and mergers. This is termed financial modelling and it is deemed to be complex science to say the least. Bankers find this science easier than many other investors as they have the luxury of working with cash flow and it is easier to make sense of cash flow than it is to make sense of price projections on silver and gold.
Discovering the real worth of a commodity is considerably more cumbersome. Various factors affect the demand aspect of a product and many of them have different break even prices whereby the pricing becomes too expensive. Silver has these problems and to add to them, silver is recyclable. In terms of supply, miners obviously produce silver and there are many players that are involved in recycling silver. Certain companies trade in silver so that jewelry can be changed back into the raw product fit for reselling. In effect, the process of recycling is simply borrowing silver that has been produced in the past.
It is easy to quantify silver that has been directly produced by mines and this means that output can be easily measured. Silver miners are motivated to produce silver when he gap between the cost of silver and the value of the silver is at its widest. The wider this spread is the more profit the miners will make. However, there is a hedge between the user and the producer and this does not get the attention that it deserves.
Rising oil costs contribute largely to the expenses of silver mining and are one of the principle reasons that silver mining is so expensive. Oil is after all required to fuel the equipment that is used to mine silver. Silver mining is the process of combining petroleum and human energy to deliver the product that we all know as silver. Mining becomes more cost-effective every time the price of oil drops. Cartels are unfortunately keeping the price of oil high and this is affecting the production cost of silver.
As silver is used for many industrial purposes such as solar panels, its worth is increasing all the while. Silver is used in many other applications as well and this keeps the demand for silver rather high. It is clear that the price of silver is largely dependent on the price of oil and that production costs will be affected in the future based on the oil price. Investors who wish to get into the silver investing game can only hope that oil prices will reduce considerably so that they can buy silver for even cheaper. It is after all no secret that silver market manipulation is still pretty much at the order of the day, helping to push silver prices artificially lower.