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<p>[QUOTE=&quot;NorthKorea, post: 1988134, member: 29643&quot;]Obviously, coinage doesn&#039;t count toward consumption, since it&#039;s easily recovered from coins. That&#039;s why bubbles in commodities are usually defined by a significant (say 40% or more on a YOY basis) increase in &quot;investment&quot; in the commodity. As for Fuji and silver in film production, that isn&#039;t as big of a concern as silver stackers wanted to believe in the run up, nor PM bears wish to believe in the ratchet down. The exit of film processing in the silver consumption equation is off-set by the increase in set-top boxes and wireless devices.</p><p><br /></p><p>Now, the key returns to the 2008-2012 comment, and I don&#039;t think that happened, at all. I doubt that five years of &quot;investing&quot; in silver, representing 18% of the production over that time, would be enough to offset a decade of the the other 82% consumption. Yes, removing that 18% from the demand side of the equation would remove excess valuation above the economic profit defined output for producers. Now, the question evolves to whether that 110% of a year&#039;s consumption (90/82 lazy estimate) is enough to suppress prices over a decade. I&#039;m not sure it would, since producers would have incentives to purchase on the open market to fill contracted orders, if the price is below the marginal cost of a unit of production for them. As such, a soft floor would develop at the marginal cost of production.</p><p><br /></p><p>We may witness short-term flooding of the market, as technical investing programs execute stop orders on the sell side, but that supply would be absorbed by producers to fulfill contract obligations. If we assume 2013 was the final year of unhedging of obligations, then manufacturers would also purchase their silver directly from the open market. Lower commodity prices could lead to higher production of final goods, as the economic impact of parts would start to matter again.</p><p><br /></p><p>Someone wrote, when silver was at $35 that the producer impact of silver doubling would be minimal due to the small percentage of silver used in components. That was, by far, one of the worst arguments for a continued bull market in PMs, since it would also imply that consumption wasn&#039;t driving price, which would imply the price was non-sustainable.</p><p><br /></p><p>This next section is more for a break from the technical argument. It takes 6.5 tons of silver ore and 324 tons of gold ore to make a ton of iPhone 5S devices. A ton of silver ore nets 14.8 ounces of silver, and a ton of gold ore will net 0.03 ounces of gold. So the bubble in PMs drove up the raw materials cost of the iPhone by $1 for gold and silver, alone. If we assume that the cost to Apple works out as a multiplier of 5:1, that works out to a $5 increase in board manufacturing costs, which would amount to about a $35-$40 increase in final costs, after marketing and assembly costs are accounted for.</p><p><br /></p><p>Back to the commodities case. If we ever reached a point where it was viable to recover silver from phones, yet non-viable to simply mine for more, we&#039;d see recover of the silver from electronic devices. We aren&#039;t in that scenario, so miners are still the primary source of silver.[/QUOTE]</p><p><br /></p>

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