Is A Physical Silver Shortage Spike Imminent?

Tyler Durden's picture

That imbalances in the supply and demand of precious metals, particularly silver, could lead to a shortage of physical product in the future should not come as a surprise to many - it is a topic covered extensively here in the past. Nonetheless, as a useful reminder of the big picture in the silver market, Future Money Trends has released another update video, reminding viewers that if traded purely on fundamentals, there is a high likelihood of increases in the price of silver, and other precious metals. As the authors put it, " There simply isn't enough physical silver to deal with the demand of a fiat currency crisis. As the paper silver market pushes prices down, all hell will break loose in the physical market." While that conclusion may or may not be applicable just yet, when coupled with recent revelations of potential double counting of precious metals at the warehouse level (see HSBC-MF Global story), the situation will certainly get only more exacerbated. Furthermore, should silver miners take Eric Sprott's advice to heart and decide to convert some or all of their product into physical, the market will suddenly recall that in addition to liquidity, prices are also determined by something called fundamentals. And fundamentals, especially in combination with a market risk spike, confirm a price jump may be imminent.

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MolotovCockhead's picture

All I know is that they built those huge FEMA camps....waiting...waiting.....waiting for the chicken to come back to roost. Could be any day now.

Nobody special's picture

Rehypothecation was a way to draw tangible assets back into the market. Without it, the market would have collapsed long ago. Harvey Organ was on this one. He noted there was more physical being withdrawn than existed. This was the method.

Consider gold. If there was a shortage, the paper market would fail. But if owned gold could be reappropriated without detection, it could be used to prop the market up longer. We have that in silver. We have that in gold. And once delivery is demanded in physical, we have that no more. Few chairs remain and the music has stopped.

FMR Bankster's picture

Things change and silver, like all commodities is impacted. There used to be large commercial consumption in photography, now there's very little. On the other hand new needs have emerged. And of course there has been shortages, silver was around $2 an oz in 1971 and it's $32 today. Not bad. I suspect it will get much better in the future. Much of the spike in price possibility here is that silver is mined as a by product, very rarely as the primary metal. So silver going from $32 to $100 won't drag much supply from the ground but it will come from safe deposit boxes and jewelry boxes.

vamoose1's picture

Immiment?   Were you trolling during spelling class?

Barbarous Relic's picture

Silver, the other white meat.  

akak's picture

Precious metals: they're not just for breakfast anymore.

akak's picture

CME & LBMA: Where's the beef?

akak's picture

"Hello, Kitco/CapitalOne, my name Jon Nadler."

High Plains Drifter's picture

as a silver bug, i am afraid to talk about silver around here with that evil trav7777 lurking ............:)

akak's picture

Not to worry --- Sundays are his work days, when he is busy bombing black churches. 

High Plains Drifter's picture

but but but, its just a industrial metal............

Obadiah's picture

Silver BitcheZ

Did I say it right?

apberusdisvet's picture

Watch for both GLD and SLV to implode within the month; nobody with half a brain would invest in these manipulation scams.  And the CRIMEX will default within the next 3 months; count on it.  The reality is that Sprott, even with his excellent relationships with miners (given his various portfolios of mining stocks, will not be able to find the millions of ounces he needs for his new vehicle.  There are no, I repeat no, large physical stocks of silver available.

Al Gorerhythm's picture

Well, not at these prices, at least.

Nobody special's picture

Ha. Not at this price. At what price then? The published price is for paper, not physical. And if the paper price plummets, there goes your pricing mechanism. The divergence will make it impossible for us to know the true value of silver, at least until smoke clears.

Serious question people... how WILL we price our silver in this event? What would be a reasonable buy price, sell price? Not numbers, methods of measuring value that we can apply when this happens.

Al Gorerhythm's picture

Well, let me put it this way. When I see that silver is recognised as money again, that'll be the time when mine gets re-circulated. Price? Well, I'll rely on historic values rather than the hypotecated short sold exchange rate of today. One caveat to that is that the historic value may well be due for a reset, taking into account modern consumptive uses.

stacking12321's picture


i use this as a guideline:

1oz gold = 16 oz silver = 16 barrels of oil

right now silver is way underpriced.

when silver:gold ratio reaches 12:1, time to sell silver

stacking12321's picture

i suspect his new vehicle and also his letter to miners to hold silver instead of cash, are an effort to put pressure where he sees weakness, i.e., availability of silver supply.

jomama's picture

btw, i would love if someone could calculate or provide direction to numbers that i could crunch that determine how much leveraging power in FRN's is removed from the system by buying 1oz. of Ag! 

Piranhanoia's picture

can't compare. one is real.

Ahmeexnal's picture

First buy that oz (or more), then do the math, as you feel that coin in your hand.

defender's picture

The reality is that no leveraging power is removed from the system, because the FRN is still in circulation.  You might make a very short term dent if the silver was held on margin and you paid in cash.  The opposite would happen if you had been saving cash at home and then the business puts the money in a bank where it can experience fractional reserve lending.  The system is designed for monetary inflation by any means possible, so it is very difficult to even slow the beast down.

stacking12321's picture

walking around with no pants on again?


Mr Lennon Hendrix's picture

that was funny but i dont understand why you are trolling me

seek's picture

None, since when you pay in FRN, the FRN gets recycled. That's one of the keys to the big game, and why they hate PM based money -- because you can in fact pull PM money out of the system. With a PM-based fractional reserve banking, you guarantee a bank collapse because they're lending physical that doesn't actually exist through leverage.

The closest you can come to removing FRN leverage is cash under a mattress. Unfortunately that just means you're limiting their theft to the inflation rate.

If we were on on the PM system like the one prior to the 30s, the converting to physical and stuff that in your matress would basically result in ($ per oz)/reserve ratio dollars being removed from fractional reserve availability.

Current reserve is 10% (10:1 ratio) but there are a LOT of games, since CDs, time deposits, etc aren't counted against reserves. Let's assume it's 15:1, and silver is $30/oz, 1 oz would pull $450 out of the system, but only if we were on a PM-based standard. We're not, so it's a moot point.


Mr Lennon Hendrix's picture

printing fiat dilutes itself


RoadKill's picture

What is industrial demand for silver relative to total production?

Ohhhh. I see, you want to count ETF buying as demand. And an earlier column called for silver miners to stop selling their silver and calling their stick piles cash. Why bother spending $ digging it up then? Just leave it I'n the ground and borrow against reserves to pay a dividend.

But yeah - JPM is the one manipulating the market.

If I created an oil ETF to buy physical barrells and stick them back underground, I'd be thrown in jail.

JPM Hater001's picture

We love VisionVictory.  Subscribe to this guy and Victory independence.  Sometimes he is just rehashing what ZH has already told us but he has been a long time advocate of the common man (women for you femenists out there...plz dont -1 for the PC) and deserves respect for the mountaintop he screams from.

GeneMarchbanks's picture


Not for being un-PC, but for excluding male feminists and poor spelling. Aside from that we're agreed.

Socratic Dog's picture

Male feminist?  Wanker.  Shirt off.  I'll fight you for that.

GeneMarchbanks's picture

Let me break this down for you as you seem confused:

'Male feminist?  Wanker.'

Nope. The exact opposite. Being a male feminist keeps me from being a wanker. No need for wanking, ladies love male feminists... what else you got?

'Shirt off.  I'll fight you for that.'

Shirtless fighting? I'll pass. Thanks for the opportunity to display repressed homo-eroticism though.

GenXer's picture

I thought Fight Club was required reading for this site...

GeneMarchbanks's picture

It is. More importantly though, is distinguishing between things that are actual, and things that are understood symbolically. Kinda like... um... paper/physical. Stick around, your generation is about to learn a real(unintended) lesson.

kinganuthin's picture

Yeah.. ladies love male feminists, they are called "fag hags".  I'm a wanker and for it i get wanked often.

vato poco's picture

Marchbanks: "[I'm a] male feminist."

Wait. So you're *admitting* you're a pussy? Interesting strategy there. I bet the ladies just eat it up!

GeneMarchbanks's picture

A pussy that gets pussy? Are you calling me a lesbian?


Calmyourself's picture

I'm a lesbian..  Trapped in an ugly man's body does that count??

akak's picture

Based on my experience, every lesbian is trapped in an ugly man's body.

AC_Doctor's picture

Robojackoff says otherwise.  Buy LULU, Netflix and PriceLine and wait for the huge melt-up coming from hypothecation of stock certs...


Glasgow Gary's picture

Something you'll never hear on the silver bull sites: the production of silver has not peaked. Has not peaked at all. In fact, global production of silver is growing very strongly. Unlike, oil, and unlike gold.