It is the last bidder at the auction that sets the price. The most recent example of this economic truth is in today's energy market, one only needs to look at California to see how the last bidder is setting the price. Relative to silver this means that marginal silver users, whose needs MUST be satisfied, will bid prices to the level necessary to entice those last remaining silver producers to sell. This principle must be kept in mind as our essay continues. The third principle is also plain common sense.
Production costs themselves are a function of price inflation.
When inflation carries production costs up, the price of the end product must rise. History teaches us that over the long run, the price of all goods and services tend to rise in direct proportion to increases in the general price level. To look at silver as an investment, we need to ask what is silvers balanced price. In other words at a price that provides enough profit to continue operations. Marginal producers are those that are on the edge of profitability.