There is a case to be made that world production is not the only issue, but the available supply is just as important, if not more.
In the case of gold, a relatively small portion of supply is consumed, as the bulk of it is held as jewelry and bullion. One might say that if the bullion banks get into a pinch, the central banks can bail them out by 'leasing' gold to them for sale. In fact there is quite a bit of circumstantial evidence that the central banks have been doing this for some time, and would be in serious difficulty if they faced external audits.
In the case of silver however, quite a bit of it is used in industrial production. The counter case is that as the price rises, additional material is available in recycling operations from scrap. There is also a significant supply of bullion, but unlike gold it is widely dispersed in ownership, with central banks holding little or none in their reserves.
There is a remarkable concentration in the short position in silver and gold.
All things considered, silver looks like an accident waiting to happen to a handful of banks who may have crossed up one market too far.
chart courtesy of Sharelynx
