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Thirty Years of Silver Supply Deficits
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Thirty Years of Silver Supply Deficits
Written by Jeff Nielson (CLICK FOR ORIGINAL)
In a recent announcement from the media “consultants” who provide us with most of our official data for precious metals markets, we were told that the silver market just experienced a supply deficit for “the 3rdconsecutive year.” However, as recently pointed out by another noted silver commentator, Steve St. Angelo, the same consultants have produced data showing that the silver market has been in a supply deficit for twelve consecutive years – four times as long as what they just finished publicly claiming.
Is twelve consecutive years of silver supply deficits the end of the story? Not quite. If we go back twelve years in time, this brings us squarely within the timeframe of an old chart (see above) that will be familiar to many readers.
Twelve years ago, we were supposedly near the end of a 90% nose-dive in silver inventories, where inventories fell by roughly 130 million ounces per year. Those inventories certainly wouldn’t have fallen at such a precipitous rate if there was a “surplus” in the silver market during those years. This relentless plunge in inventories represents another long stretch of supply deficits, which (according to the chart above) date back to 1990. Suddenly, the consecutive deficits in the silver market stretch to twenty-five years, a full quarter-century.
Arguably, however, even a quarter-century of consecutive supply deficits in the silver market is still likely an understatement. Before addressing that argument, it’s important to note the supposed turnaround in silver inventories that the previous chart indicates. It never happened.
As has been explained in a number of previous commentaries, it was in 2005 that the bankers came up with one of their largest and most-notorious frauds in precious metals markets: their so-called “bullion-ETF’s.” As one aspect of this fraud, they began pretending that the “units” (of silver) in these funds, the property of investors, represented additional “inventory” in the silver market.
The Big Banks (and primarily JPMorgan) claim to be holding the silver purchased by investors in these funds, as trustees. At the same time, we’re told that this same silver is an “inventory” (i.e., available for purchase). In the real world, when a person buys an ounce of (physical) silver, inventories decline by one ounce. In the paper fraud world of the bankers, when someone buys an ounce of silver (via a bullion-ETF), inventories increase by one ounce.
Along with that analysis, we have the additional evidence presented at the beginning of this commentary. From 2005 to present, the silver market has remained in deficit, officially, while global demand (especially in India) has been rabid, and while China has gone from being a large supplier of silver to a large net-buyer.
In 2005, the world was nearly out of silver, and the market has remained in deficit every year since. At the “burn rate” shown in the chart above, the world would have run out of silver some time in 2007. So where is (was) the default?
This was the subject of a previous trilogy of commentaries, which postulated a “secret stockpile” for silver. The data above says that the silver market must have defaulted in 2007. It didn’t. The market has remained in deficit every year since. The silver to satisfy these perennial deficits had to come from somewhere. Readers interested in this subject can refer to those earlier commentaries.
Returning to the present subject, what evidence is there that the supply deficit in the silver market extends even beyond twenty-five consecutive years? To support this position, we need to refer to an even older chart, a longer-term chart, which reflects the more extensive era of manipulation of this market.
Back in the early 1980s, after the explosive rise in the price of silver (and gold), which culminated in 1980, the banking crime syndicate then crashed this market, taking the price of silver back down, not to previous levels, but to a 600-year low, in real dollars.
We know this was the result of intentional fraud/manipulation and not merely a “boomerang” from the previous 1980-high. We know this because after the price of silver hit this ultra-extreme low, the banking crime syndicate held the price at that level for a full decade. It was only after that point in time that their chokehold eased, and the price of silver began inching higher.
What happens when you push the price of any product to a 600-year low? You bankrupt most of the producers of that product. This is what happened in the silver sector. Well over 90% of all silver miners were driven into bankruptcy.
For over 4,000 years, most of the world’s silver was produced by “primary” silver mining in silver mines. We obtain almost all of our metals through primary mining. But since the banksters crashed the silver market to a 600-year low (and all the way to the present), we have received 70–80% of our annual supply of silver as the byproduct of other mining in copper mines, lead/zinc mines, and even gold mines. This practice is yet more proof of serial price-manipulation.
Can any metal with perennially high demand possibly be “in surplus” when the vast majority of supply to that market is indirect, coming from separate mining industries? Before you answer that question, remember that we are dealing not only with “a precious metal” that has high allure/demand in that respect, but also the world’s most-versatile “industrial metal.”
A high-demand market, plus anemic supply (due to perpetually suppressed prices) is an equation that yields only one possible result: supply deficits, year after year after year. Even the (brief) rise in the price of silver to over $40/oz (USD) was not sufficient to reverse the supply deficit in a crippled sector where the supply deficits have lasted for roughly thirty consecutive years.
Against all this evidence (and all this fraud), what do we get from the Corporate media, mouthpieces for the bankers?
The silver market is heading towards a third consecutive year of a physical supply crunch, and although such deficits do not affect prices in the short run, it may push the metal’s price higher longer term…
Supply deficits “may” lead to a rise in price? Hilarious. Perpetual deficits can have only one outcome: default (once the Secret Stockpile is exhausted). At some point, this is how the deficits must end. Simultaneously, the world must have silver. A dizzying array of consumer and industrial products would see their supply dry up with any default in the silver market.
How do you reverse a “supply deficit?” Economics yields only one answer to that question because arithmetic yields only one answer: higher prices. Raise the price of silver high enough and more companies will begin mining it in silver mines, lots more. Raise the price high enough and (eventually) demand for silver will decline.
What happens when you increase the supply and decrease the demand for anything? You produce a supply surplus. The only “cure” for the over thirty years of extreme, criminal price-suppression by the banking crime syndicate is higher prices. The only cure for over thirty years of consecutive supply deficits in the silver market is higher prices – prices that are much, much higher than the absurd current price of under $15/oz (USD) – in order to replenish the totally depleted inventories.
How much higher?
A recent commentary pegged a fair price for silver, today, at $1,000/oz (USD). That estimate was based upon nothing more than an objective, historic metric: the average wage. At $1000/oz for silver, we would have lots of silver mines, and much, much more supply. Once again, we would return to normalcy, where the world gets most of its silver from silver mines.
At $1,000/oz there would be considerably less demand for silver, though declines in industrial consumption would not be as great as some might think. With silver being used in only tiny quantities in many of its industrial and consumer applications, even a price increase of this magnitude would only mute demand.
For some applications, producers and consumers would simply adapt to higher prices, something we are already doing every day of our lives. For other applications, there would be a “substitution effect,” and inferior (but cheaper) metals would be used in place of silver.
Even in terms of investment demand, the effect of $1,000/oz would be different from most readers’ expectations. Certainly, pure “investment demand” for silver would decline, but what about jewelry demand? At $15/oz, silver is regarded as “junk jewelry”: fine for teenage girls, but beneath the “radar” of most adult women (and the men who buy much of their jewelry).
At $1,000/oz, however, silver would no longer be junk jewelry, and suddenly women (and men) would notice that the brilliance of silver exceeds that of gold. Meanwhile, in a world of $1,000/oz silver, the price of gold would inevitably soar to many multiples of that price – at least $10,000/oz.
With gold jewelry priced out of the reach of many (most?) consumers, and with silver jewelry being arguably more beautiful than gold and properly valued, demand for silver jewelry would soar higher, high enough to sustain a price of $1,000/year (as valued in today’s dollars).
After a full generation of systemic crime in the silver market and thirty consecutive years of supply deficits, there will be a reversal in this market, and that reversal can come in only one form: we will see the price of silver appreciate to something resembling “fair value,” one way or another, and that real-world price will dwarf the estimates of most readers (and commentators).
Thirty Years of Silver Supply Deficits
Written by Jeff Nielson (CLICK FOR ORIGINAL)
Please email with any questions about this article or precious metals HERE
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Mining supply is still rising. Only half of it gets consumed... meaning there's still a shedload of the stuff ready to be dishoarded.
These silver pumpers have been telling us the same horeshit for as long as I've been buying (~5 years).
If the price goes back up, it will be because the banksters have manipulated it back up like they did in 2011. Supply/demand are clearly factors that should be ignored here.
The silver pumpers you refer to understand that the paper price does not reflect the fundamentals. Not nearly enough time to debate the reality. Currently reality exisists only sporadically. There will be a tipping point. Time will see to it.
Most who have an affinity for metal are not purchasing due to a perceived shortage. It's price and the perception that this particular commodity has real sustaining and intrinsic value and is severely underpriced.
Oh, and it's shiny and pretty.
bigjim,
i would encourage you to sell your silver, it is not for you, sell it to someone who will appreciate it more.
as belangp puts it, you should only own enough PMs as your understanding will allow.
Yes, because silver is magic. Even if the price drops 20%, I should be happy because I have... silver.
You have my offer
happy? the only limit to your happiness is whatever limit you impose upon it.
you might be more happy if you didn't worry so much about what a particular cartel claimed the value of your silver is.
I didn't buy silver because I have some kind of love for metals with an atomic number of 47. I bought it to preserve capital.
And so far, I've realised a NOMINAL loss of around 25% (which is a lot better than the people who bought at $50/oz, I know). When you factor in inflation, I've probably lost around 35, even 40%.
This only matters if I need to sell my Ag to buy stuff before (if?) Ag's price goes back up. Sadly, that's increasingly looking like the situation I'm in.
"Mining supply is still rising." According to who?
Around 900 million ounces of the stuff are mined EVERY year. Only half is consumed... meaning ~450 million ounces of the stuff are being stockpiled EVERY year.
If I had done my DDD I would never have bought the stuff. I'm holding on to it in the hope the banksters will lever it back up as they did back in 2011. Then I'm out.
I hold gold because I think there's a fair chance the USD will lose WRC status in my lifetime and gold will be the defacto international trade settlement. But there is absolutely no reason to believe silver will be remonetised. Stacking it really is a gamble.
https://www.silverinstitute.org/site/supply-demand/
450 million oz surplus...that would allow everyone in the world to have 2 grams each. That sounds like a shortage to me.
Per annum.
You people appear not to realise that only half of the stuff being mined per year is actually used up. The rest gets hoarded... meaning there's billions of ounces of the stuff out there ready to come back onto the market.
Only half is consumed... meaning ~450 million ounces of the stuff are being stockpiled EVERY year.
What numbers are you pointing at in your link to arrive at what you said?
Twelve years ago, we were supposedly near the end of a 90% nose-dive in silver inventories,
Twelve years ago, 25% of silver supply went into film. Today that's 6%. Thus, supply is still going down in the face of a 19% reduction of total demand from just one sink? Pretty amazing!
Check out the demand curve for both photography and solar-panels (not to mention other new applications).
Twelve years ago we werent carrying cellphones and a multitude of other gadgets in the numbers we do today, whose demand and silver usage have far outstripped that reduced demand for film silver. That 19% reduction in demand is fiction.
My only goal is to leave my kid some real wealth, and the satisfaction lies in knowing that I'm right.
If you died 4 years ago and left them silver you were obviously "wrong". Now if you had left them a forest ....
Well, I did not die four years ago. I sold. DCA is just above zero, and commencing another round. If I'm lucky I've got 15-20 years remaining on this planet. Maybe I'll be able to finance some modest luxuries with my winnings before then.
Ironically, I am leaving her a forest, and some good soil.
Teach your child well, give her the gift of character and independent thought. That never goes to zero. And teach her to shoot straight out to 200m. Silver - now thats a bit of a gamble.
“A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.”? Robert A. Heinlein
I sold.
Why?
Why did I sell? Because I wasn't brainwashed and practiced a tried and true method of wealth building.....Buy low, sell high.
Sold enough to pay, in full, for the stack I held onto, Hence zero cost stack, and now I'll buy all the way down. Premiums will simply expand as paper price falls. 7-9.00 AG will likely cost you 12-17. At least that's how I see it, and recent history reinforces this argument.
The longer it stays depressed, the more time I'll have to accumulate. It won't take a disaster to realize a gain. It surely did not this last time. Fundamentals, The Cycle, or maybe even another quality manipulation will see to it.
You people with perfect trading vision and timing mystify me. Gold and silver were going down throughout the whole QE (monetization) thing. That defies logic. Yet you sold into that? What magic cues are you watching to detect the upturn?
It wasn't perfect trading vision, nor was it perfect timing. It was diligence and rational decision making. Reading and listening to everything I could find every day for two solid years. Listening to all, following none and drawing logical conclusions. It's now three years after the fact, and yes, it worked out well for me.
I sold in tranches on the way up, and again on the way back down to 34. I sold nothing at the top and was even forced to part with a little more further down on the way to 25. That was the toughest decision, but in hindsight,,, well you can see where we are currently.
Yes, for every person who managed the situation as I did, there are likely two or three who are massively underwater.
Yes, I own substantially less than my original investment. I began as a bug and transitioned into a physical trader. I've even taken advantage of the recent depression in prices to pick up artful, lower mintage and collectible pieces which were fetching huge premiums during the runup and likely will again.
Now, the opportunity exists (I believe) to re accumulate. If you do the homework then you may also see opportunity. This is not a get rich strategy. It's a store of real wealth. Call silver money, a hedge, an insurance policy...whatever. History, fundamentals and liquidity are some reasons why I've made the decision to invest in metal. The time investment in the metals is what opened my eyes to the larger picture, and I'll always be grateful for the knowledge and insight those wiser than I shared with me and the entire community.
Using the language "You People" and "Defies logic" tells me that you likely spent little time developing an understanding of what was happening during the period, or how the picture continues to develop. It was no different than purchasing a rising stock and deciding to sell as opportunity presented itself
Now filtering out all the mush: What leads you to sell silver in the face of rampant counterfeiting (QE)?
There is no deficit in silver production compared to silver consumption.
The only thing that has happened is that cenrtalized inventories have been migrating to more dispersed inventories. The silver stacker has no way to use the silver other than to sell it. That is by definition an inventory, not a consumer. AND, the silver stacker has no control over price. That is controlled by the London banking empire.
The other issue is that the whole concept of a silver deficit is odd. As you say, one inventory is being dispersed into many. If inventory is drawn down in silver, that's not necessarily a deficit. Especially if it is only being stored in another form. In his mind SLV silver if it exists and Sprott trust silver do not count as inventories, but as consumption. As the Hunt brothers discovered, when prices start to rise, "consumed" silver can become "inventory" very rapidly.
I followed link to $1k/oz ag theory. Why is population never taken into account? World population that is.
Obviously the manipulation of "money" and PM's has led to a huge misallocation of resources. An unsustainable allocation on top of that. But, nobody ever talks about the misallocation of total global population. A population that may have been smaller or larger at this instance in time had PM valuation not been manipulated.
What is the theory, or correlation, between population and PM valuation? As a rudimentary example, if the supply of people able to mine PM's with their bare hands increases, then doesn't the value of said PM decrease? Complicate with changing (delta per time) of population to rate of PM extraction as these are not just finite points on a graph, but infinite slopes.
Population.... More Demand coupled with finite/less supply, always equals higher prices...
If the trend is your friend a 600 year trend may be pretty hard to turn
Silver is needed for Bombs.. keep silver out of the hands of Banksters.. Give Peace a Chance hold Silver..
hey that has a Nice Ring to It... ( pun intended )
Oh, wow, now I understand why the price is in free-fall !
Thanks so much for the real unbiased truth.
Why is no one mentioning the massive fall in mining, which means massive fall in silver production???
This is good a place as any to drop this link:
http://www.reuters.com/article/cme-moves-hunnable-idUSL8N13R32N20151202
I wonder why Harriet is cleaning out her desk at the CME?
Buh bye, Harriet.
Sorry Eric, many of us remember you saying that the silver was all gone three years ago.
Epic FAIL.
It's puzzling how SLV can "add" a million ounces to its supposed inventory, without affecting the prices, or even as the price falls.
Some investor buys a hundred shares of SLV, they take his money and show an addition. Prices comatose or falling.
When Sprott bought some for his fund a few years ago, it moved the price upward pretty nicely.
He really bought the silver, see. It moved. The ETFs are stifling prices for the very people that bought into them.
When silver blows up it'll be epic. Whenever that may be.
"Whenever that may be." - exactly. I ain't getting any younger.
I wll tke up to 100K US off your hands at spot, any style 99.9 pure, right here right now.
Gee, thanks, can't wait to physically realize my 25% paper losses.
That's cause SLV is BullionDirect on steriods.
If “they” can suppress the price of silver for 30 years, during the peak of the “Electronics Revolution”, why can’t “they” continue to suppress the price for another decade?
If the excessive debt incurs a market clearing debt liquidation, and the markets lose their hyperinflated prices, then again gold and silver would be considered real money. You've seen the statistics, traditionally people held 5-10% of their wealth in precious metals before the fad of equity and bond portfolios was created by wall street.
Unsustainable trends don't last, passing phoney paper claims boosted by below market rates of credit back and forth like a hot potato can only last for so long. I think a 3rd crash in 15-20 years in paper assets will be enough to expose the fraud, and by then the players will switch their wealth to real assets like PMs, property and local business investment.
Yeah Ok, so when does it go up, even a little?
doesn't really matter unless you are a trader.
an ounce of silver doesn't go up or down, it's always just an ounce of silver.
at some point though there will be a collapse of the phony western banking and finance schemes and there will be a huge demand for tangible assets of real value where people can hold their wealth.
feels like that time is coming soon, i would guess within a year.
feels like that time is coming soon, i would guess within a year.
Guess how many years I've been hearing that for.
why does it matter what you've been hearing?
it will happen, maybe in the next year, maybe not, but i'm guessing it will.
but it will definitely happen.
that's what unsustainable means - that which can't continue, won't.
Because I may need to liquidate my hoard to buy food. If it's lost 25% purchasing power, as opposed to some other thing (say, REITs, USTs or whatever) that may have gained 25%, then all the silver pumpers who said it was going "to da moon!" were full of shit.
I take responsibility for not doing my own DDD. Regardless, I've lost capital.
I think they are finding just enough new silver every year to keep things from going south.
no, they aren't.
there are enormous pressures on the western financial system.
why did yellen almost faint reading a speech recently?
finding a few tons more silver isn't going to fix that; the silver price is just a symptom of what's broken.
Your lips to God's ear, but I don't think you supported your theory of a "Secret Stockpile" adequately. Given the paper price suppression, I think we'll see higher premiums for physical and longer backlogs, but I think it will take an event (TBD) to trigger rapid and sustained price increases.
The only secret stockpile of silver large enough to pull off the current suppression
and readily available to the comex would be SLV. That would mean that there is
probably only a small fraction of the physical silver remaining in SLV that investors
have been led to believe. Kind of like the gold in Fort Knox.