Word: oz.
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...really mesmerizing gains have come in the silver market. Silver has more than quintupled in value in the past year, with much of the gain coming in the past three months. Last January, silver was selling for $6.25 per oz., and anyone astute or lucky enough to have bought a typical 5,000-oz. contract for a twelve-month future delivery would have made a killing. For a $2,000 margin payment to his broker, the canny investor today would hold the rights to $127,500 worth of silver, a profit of some 6000% on his investment. What is more...
World production of silver in 1979 was about 334 million Troy oz. (a pound has 12 Troy oz.). Mexico was the largest single supplier (18%), followed by the Soviet Union, Canada and the U.S. But, as has been the case for years, demand surpassed supply, by perhaps as much as 90 to 100 million oz., in part because of industrial demand. Silver is a basic ingredient in photo film, electronic components, metal brazings, batteries and, of course, jewelry and tableware...
...imported nearly 75% of the 160 million oz. that it used last year, but the price rise has led to a surge of new investment in domestic mines, notably in Western states. Production in the Coeur d'Alene district in the rugged northern panhandle of Idaho, which is the richest silver region on earth, has held steady at about 18.5 million oz. annually over the past five years, but is expected to rise to 20 million oz. during 1980. Still, shortages will persist, and that suggests rising prices...
Most of the action in silver futures seems to be focused on two commodities exchanges, the Chicago Board of Trade and the New York Commodity Exchange. The New York exchange alone currently has futures contracts outstanding for 155 million oz. of silver, but its warehouses contain only about 70 million oz. Warns Jack Boyd, vice president of New York's Drexel Burnham Lambert brokerage firm: "The ownership of the contracts is concentrated in only a very few hands, and there seems to be a definite indication on the part of the contract holders to want actual delivery...
...most effective, quick step that the U.S. could take to pop the bubble would be to auction off a chunk of its 180-million-oz. silver stockpile, the only substantial official reserve of the metal left in the world. An auction would help cool down the markets for all precious metals, including gold. Some lower Treasury officials last week discussed how to stem the gold and silver stampede, but decided to hold back when rumors of a gold auction alone were enough to cahn the markets. Said one Treasury official to TIME Washington Economic Correspondent William Blaylock at week...