The Silver Market Is Set Up For A Mucher Higher Price Move Than Gold

SRSrocco's picture

SRSrocco

By the SRSrocco Report,

When the paper markets finally collapse, the silver market is set up for much higher price gains than gold.  Why?  Because the fundamentals show that precious metals investment demand has put a great deal more pressure on the silver supply than gold... and by a long shot.

There are three crucial reasons why the silver price will outperform the gold price when the highly inflated paper markets disintegrate under the weight of massive debt and derivatives.  While many precious metals investors are frustrated by the ability of the Fed and Central Banks to continue to prop up the markets, the longer they postpone the day of reckoning, the worse the collapse.

The first reason I wrote about in my article, Critically High U.S. Silver Supply Reliance In Jeopardy When Paper Markets Crack:

U.S. Net Import Reliance Silver

The United States silver net import reliance as a percentage of total consumption, was 72%, versus 36% for copper and a negative 48% for gold.

This chart shows that the U.S. relied upon 72% of its domestic silver demand from foreign sources in 2015.  Thus, U.S. silver supply reliance (72%) is double that of copper (36%), while U.S. gold demand enjoyed a 48% surplus versus its domestic supply.

The second reason the silver price will surge higher than the gold price is due to the amount of physical silver, in total ounces, purchased by investors versus gold:

Silver vs Gold Bar & Coin demand

From 2010 to 2016, investors purchased a total of 1,505 million oz (Moz) of silver bar and coin compared to only 284 Moz of physical gold.  Thus, precious metals investors purchased five times more silver ounces, than gold ounces during this seven year time period.

Of course, the total value of physical gold investment was much higher than silver during this time period, but this tremendous amount of silver bar and coin demand has impacted the silver market much greater than the gold market.

This brings me to the third reason.  Due to the huge amount of silver bar and coin demand since 2010, the silver market suffered a net deficit of 801 Moz.  However, the 284 Moz of gold bar and coin demand did not impact the gold market the same way.  According to the World Gold Council, the gold market enjoyed a small 7.5 Moz net surplus during this time period:

Silver vs Gold Net Market Balance

While it is true that World Gold Council may be underestimating Chinese physical gold demand, and its impact on the annual surplus of deficit figures, a 7.5 Moz surplus is only 3% of the 284 Moz total gold bar and coin demand figure 2010-2016.   However, the 801 Moz net silver deficit is more than 50% of total silver bar and coin demand during that same time period.

Which means, physical silver investment demand is causing much more stress on the silver market than it is on gold.  While the silver market has been able to supplement the annual deficits with old silver coin stocks or large bars that were liquidated during the 1990's, this is not an endless supply.

According to the data I obtained from the GFMS Team at Thompson Reuters, invested dumped a net 580 Moz of silver bar and coin on the market between 1995-1999.  Now compare that to the past five years (2012-2016) as investors purchased a net 1,152 Moz (1.15 billion oz) of silver bar and coin.

And here is the CLINCHER.  From 1985 to 2007, the total net silver bar and coin demand was a NEGATIVE 95 Moz.  Which means investors sold a net 95 Moz of silver bar and coin in that 23 year period.  However, investors purchased a net 1,785 Moz of silver bar and coin from 2008 to 2016.  This is a huge TREND CHANGE.

After the U.S. financial and economic meltdown in 2007, investors continue to purchase a record amount of silver bar and coin.  This has put severe stress on the silver market as the total net deficit since 2008 surpassed 1,155 Moz.

While the silver market will continue to supplement the ongoing annual deficits with old silver stocks, this supply is not endless.  Furthermore, the days of the TRUMP STOCK MARKET RALLY are numbered.  The last time the stock market crashed 2,000 points in the beginning of 2016, investors flocked into gold and silver in a BIG WAY.

In conclusion, the fundamentals in the silver market are setting up for a much higher price spike than gold due to the three reasons stated in the article.  The timing of these event is hard to forecast as it is difficult to pinpoint when the Fed and Central Banks lose control of their massive market intervention.  My work is not meant to provide a short term outlook on the precious metals, rather it offers fundamentals that will win out over the medium to longer term.

Precious metals investors need to look at buying and holding gold and silver the same way an individual puts money away each month in their 401K, pension plan or retirement account.  The difference between the precious metals investor acquiring PHYSICAL METAL compared to individual acquiring PAPER ASSETS or DIGITS, is one is real wealth, while the other is an IOU.

To understand why the markets may be heading for big trouble, check out my article, A Large Crack Appeared In The Global Market... And No One Noticed.

Lastly, if you haven't checked out our new PRECIOUS METALS INVESTING section or our new LOWEST COST PRECIOUS METALS STORAGE page, I highly recommend you do.

Check back for new articles and updates at the SRSrocco Report.

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Nobodys Home's picture

Silver to gold is what today? I haven't checked.
60 or 70 something to 1?
Thousand year average being 15-20 to 1
Myself, I see a possible upside.
Maybe still in a long streak of a good time to buy.

edit: Where's the Kawk brothers when you need them?

Miss Informed's picture

Lots of bad spellink here. Now the silver rocket ship is back too. Credibility? Maybe not so much.

wattie's picture

Seeking ANGRY Gold and Silver Investors

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http://www.gata.org/node/17160
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Your opportunity to join the fight back!!
 
In this regard, Own Bullion Ltd invites anyone whether an individual investor or investment group, WORLDWIDE who has invested in either gold/silver related instruments during the time period 1999-2014 to join the proposed GLOBAL class action and this includes without limitation;
 
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Gold/silver bullion coins, 
Gold/silver futures, 
Shares of gold/silver-focused ETFs, 
Units of gold/silver-focused mutual funds, 
Gold/silver certificates, 
Gold/silver leases, 
Over-the-counter gold/silver spot or forward transactions, 
Options on any of the foregoing (“Gold/silver Market Instruments”) 
 
 
We already represent investors from 18 different countries and millions of dollars in investments. This is everyone’s opportunity to stop complaining and finally stand up and be counted. Every new joiner brings strength to our group and in turn benefits from the collective investment of what is already a very powerful group.

Nobodys Home's picture

SOoo...I'd need to declare the bullion I lost in my canoe accident? No thanks.

AR15AU's picture

Lots of fuk faces in denial about silver's move that is underway... 

Go look at a chart... we bottomed in Dec 2015. 2016 was a nice year with most mining companies up between 100% - 500%

And now we are ready to really move and the douchery paid shit stain class comes in to lie lie lie.

Good luck, you fux

Nobodys Home's picture

Who you talkin bout Willis?!

Dragon HAwk's picture

There is only one true price of Precious metals and that is the Delivered price.

Flying Wombat's picture

How the United States interfaced to attack the Indian gold and cash economy - hard hitting analysis by F William Engdahl.  Great interview!  - Eric Dubin, Managing Editor, The News Doctors.

http://thenewsdoctors.com/washingtons-war-on-cash-usaids-role-in-indias-war-on-cashgold-f-william-engdahl

Flying Wombat's picture

Engdahl is on a role.  Another oustanding read:

U.S. To Launch Currency Wars Against China and Germany? F. William Engdahl's Perspective

http://thenewsdoctors.com/u-s-to-launch-currency-wars-against-china-and-germany-f-william-engdahls-perspective/

 

TheRideNeverEnds's picture

So if I got this straight, the fact that investors hold BILLIONS of ounces of physical silver is an argument for the price of silver going higher?

Silver has been going down in price for six years now making it so that almost everyone who bought it in that time frame is well into the red, most were never up any money at all as buying actual silver is a hefty premium and now many are up to 70% underwater on their investment. What do you think will happen if silver starts going up? Well we saw what happens in the last few months after it did just that. People sell some of the BILLIONS OF OUNCES of shiny metal they foolishly purchased on the advice of metal dealers selling them financial salvation in the form of a shiny pet rock. Silver is going back to $5/oz.

Also, hows that dividend payment on those silver bars treatin ya? Gaia planning on raising it any time soon?

AR15AU's picture

There are only 2 billion ounces of above ground silver in the world. Multiply by $17 and you get $34 billion dollars for all of the worlds above ground silver supply.

All the worlds silver is $34 billion.

Netflix is 60 billion in market cap.

Starbucks is $80 billion.

Etc... so silver is highly undervalued.

 You are basically one of these Hillary Clinton shit stain trolls that can do nothing but puke up the script given to you by your masters. 

Jimmy Jimmereeno's picture

It doesn't work that way - the analogy between a commodity's value and the market cap of a stock is a false analogy.

Furthermore, despite an annual  production/consumption deficit in silver that has been ongoing for at least 30 years, the known - note emphasis on "known" - above ground stocks has been 2 bil/oz since at least the turn of the century.  You and SRSRocco have no idea how many ounces of silver are held in China.  Mr Rocco rolls out this supply/demand essay every year or so without any regard to the reality of the silver market's dynamics.

The 2011 nominal high price in silver failed to exceed its 1980 nominal high.  That failure confirmed/demonstrated that the silver market fluctuates in a long-term frame between highs around $50/oz nominal and lows in the  mid-single digits.  The market is presently well on its way to the lower bound.

When one's initial premise is wrong his conclusion will prove to be wrong.  When one cannot recognize reality, in life in general and in the markets specifically, he eventually pays a steep price.  Good luck with your spurious viewpoint.

SimmerDown's picture

The "shortage" is complete nonsense just like peak oil was. Silver supply is a factor of price, NOT the amount of Silver in the ground or anything else.

The only shortage is for the people wanting to pay $18/oz when Silver has risen to $50. If you have $50, presto, no shortage.

When oil spiked to over $100 what happened? Massive investment in drilling in formerly spent wells and hard to get new oil (shale). If a miner's all-in cost is $17/oz and Silver goes to $50 then miners start producing at formerly uneconomical mines and start new exploration. New supplies eventually come to market and drive the back price down. Not to mention stackers selling as the price goes up.

AR15AU's picture

My 2018 call options on CDE are up over 1100% even with today's 20% decline.

My 2018 call options on IAG are up 800%

My 2018 call options on HL are up 500%

 

You sound like a central government boot licking slob. Is it boot licking or ass licking? I don't care to get in to the details of your breath. 

Jimmy Jimmereeno's picture

I would guess that you were either born yesterday or that, as is SRSRocco, you are a shill.  Approximately 80% of options (both puts and calls) that are bought expire worthless.  How much of those up percentages that you listed have  you cashed in on?  You may think that you can easily repeat the short-term performance of what you've got in hand right now but I will tell you that, in that respect, you are a dreamer.  Options by definition are a wasting asset.  That means every minute that goes by works against you as a buyer.  No smart speculator buys options; he sells them.  Plus, if you are not aware of this fundamental factor you are sunk:  When one buys an option he not only must be correct on market direction but he must be impeccable in his timing.   Given those handicaps, one is better off trading futures that are leveraged.  There, he only has to be right on direction; the timing element is neutralized and the leverage makes up for, let us say, inopportune timing.  Unless you are writing options instead of buying them, you will go broke.  I've seen your story a hundred times over the last 35 years.  Good luck and bon voyage, Titanic.

alexcojones's picture

And don't forget that ginormous copper mine strike yesterday.

No copper means a LOT less silver

Copper Jumps Ahead Of Strike At World's Largest Mine | Zero Hedge
Bear's picture

"when the highly inflated paper markets disintegrate under the weight of massive debt and derivatives"

Should this happen we will have a lot more to worry about that the proce of silver vs. gold!

MrSteve's picture

Bingo! Bear is right on the money. see here for a current example of what he speaks:

https://panampost.com/pedro-garcia/2017/02/08/interview-how-bad-has-vene...

waterwitch's picture

Wait until the end of SNAP and EBT cards.  You think Venezuela is bad? 

Dg4884's picture

Just got silver delivery about an hour ago. 

Nobodys Home's picture

Do send us a youtube video of your unboxing.
Yah...I'm being a smartass:)

Bear's picture

"When the paper markets finally collapse" .... what an assumption on which to base your whole future

alexcojones's picture

Steve: Thanks for all your work you do.

Work that remains "Thankless" until such time it doesn't.

Hongcha's picture

This may be a newly-coined adverb, e.g. "bigly" and "higher-er highs"  ... !

MrSteve's picture

Does the headline really say "mucher"??  I would buy "mucho", but mucher is just plain illiterate. Kinda indicts the rest of the scribbling....

BabaLooey's picture

It's all just a much of the muchless.

Nobodys Home's picture

Ohhh..Can't we all just get alooooong?

Silverballs's picture

The spelling is correct on his home page

Goldennutz's picture

Been hearing this bullshit for years.

 

And the Crimex boyz will be carried out on stretchers!

 

PM's to da moooooonnnnnn!!!!

 

BWWWAAAAAHAHAHAHAHA!!!

Latitude25's picture

This is news?  Silver has always been more volatile than gold.