November 19, 2012 By
By SRSrocco
There are tremendous forces at work that will push silver over $100 an ounce.
According to the 2012 World Silver Survey, total global silver investment demand has risen from only 31.6 million oz in 2002 to a staggering 282.2 million oz in 2011.
As world economic fiat based monetary system continues to deteriorate, investors are taking delivery of physical silver rather than holding on paper contracts that may not be backed by any metal whatsoever.
This has created a run on the LBMA… the largest metal exchange in the world.
Evidence of this can be seen by the huge increase of U.S. silver bullion exports to the United Kingdom. In 2011, the U.S exported a mere 19 metric tonnes to London.
However, in just four months (May-Aug), the U.S. has exported 291 metric tonnes to the LBMA vaults in the U.K.. The United States has exported more silver bullion in the first seven months of the year than it did in all of 2011. Silver bullion shipped to the United Kingdom rose from 3% of total U.S. silver exports in 2011, to a staggering 42% of the 700 million oz exported so far this year.
More likely than not, the large silver bullion exports to the U.K. have been utilized to help meet the insatiable physical silver bullion demand taking place on the LBMA. As the old saying goes… where there is smoke, there’s probably a great deal of silver paper on fire.
Once the world ‘s liquid energy supply starts its inevitable decline from its current plateau, annual silver metal production will decline as well. There will be no silver glut and there will be no silver available when the world’s fiat monetary system finally dries up and blows away.
Get ready. The forces for pushing silver over $100 have just begun.
There are tremendous forces at work that will push silver over $100 an ounce.
Very few precious metal analysts understand all the forces that are at work. Some analysts focus on specific areas such as the gold-silver ratio and technical analysis, while others write about future investment and industrial demand. And then of course, we have the more unorthodox analysts who delve into the ongoing manipulation of gold and silver — a realization shared by the author of this article.
However, one of the most important aspects of silver that most analysts are completely unaware is the availability (or lack of thereof) of future silver mine supply. I am simply amazed how some analysts can forecast lower silver prices due to a so-called future supply glut that is supposedly coming in the next few years.
As I have mentioned before in a previous article, analysts today are so specialized they have no idea what is going on in another industry. It is highly doubtful that the metal analysts who make these long term silver supply forecasts really comprehend the details of the energy market and industry. The failure of these metal analysts to understand the complexity of the global liquid supply system will render their future forecasts completely inaccurate. This will be discussed at the latter part of the article as it is one of the longer term forces to impact silver.
Silver Surplus-Deficit Explained Again
There still seems to be a misunderstanding about the so-called surplus-deficit of silver.
Some analysts are pointing to the fact that increasing annual silver surpluses, without continued strong investment demand, can make the price of silver fall quite rapidly. I would like to repost this graph to show the surplus-deficit forces.
According to GFMS (now Thomas Reuters), there was a silver deficit until 2003. During this time of supposed deficits, the price of silver remained in the $4-$5 range. However, when the deficits disappeared and the surpluses began, the price of silver magically began to rise.
The first year silver was no longer in a deficit (2004) it hit an average price of $6.67 an ounce. Then in 2005 it reached an average of $7.32, $11.54 in 2007, $13.38 in 2008, $14.98 in 2009 and so on and so forth.
The white line on the graph represents the average annual price of silver. As you can see the price is heading higher in parallel with the so-called rise of silver surpluses. These silver surpluses have been absorbed by institutional and retail investors. The notion that a structural deficit in the annual silver supply would push the market price of silver higher, failed to materialize prior to 2003 when actual deficits took place.
So, here we can see that the rise in the price of silver since 2004 has less to do with industrial demand and more a factor of increased silver investment.
Silver Investment Demand: Just Getting Started
Precious metal enthusiasts who are concerned about whether or not silver investment demand will remain strong in the future… shouldn’t be. From the data I am gathering, we are just beginning to see how large of a force silver investment demand will be in the upcoming years.
One of the more notable gauges of increased silver investment over the past decade, has been the growing demand of official government coins. In 2002, total supply of official government coins and medals were 31.6 million ounces. However, by 2011 this grew to a staggering 118.2 million ounces or a gain of 274% in just nine years.
The four largest selling official government coins are the U.S. Silver Eagle, the Canadian Silver Maple, the Austrian Silver Philharmonic and Australian Silver Koala & Kookaburra. These four government mints produced 101 million silver ounces of coins & medals (majority were coins) or 85% of the world’s total in 2011.
Even though the sales of these official coins dropped off during the first part of year, strong demand has returned in the second half. For instance, there was a 32% decline in Silver Eagle sales in the first six months of 2012 when 17.4 million were sold compared to 22.3 million during the same period in 2011. However, if we look at the chart below we can see that 2012 Silver Eagle sales are now only down 18% compared to the same time last year.
There was also a similar decline of Silver Maples in the first half of 2012. From January to June, sales of Silver Maples fell 32% compared to last year. Nevertheless, when the Royal Canadian Mint releases its third quarter report, we will more than likely see an increase of its Silver Maple sales in percentage terms compared the first half of 2012.
Another interesting trend taking place and shown in the chart above is the amount of Silver Eagles sold compared to Gold Eagles. Compared to last year, Gold Eagle sales (-36%) are down twice as much in percentage terms than sales of Silver Eagles (-18%). Furthermore, the U.S. Mint has sold 53 times more Silver Eagles than Gold Eagles in 2012 (the ratio in 2011 was 40-1). Thus, retail investors have been purchasing 33% more Silver Eagles than Gold Eagles compared to the same period last year.
Even though the four countries listed above produce the lion’s share of official government coin sales, there is another country that has big plans to change their ranking in the future.
China: Big Plans For Future Silver Investment
Continued: THE FORCES THAT WILL PUSH SILVER OVER $100 | SilverDoctors.com
By SRSrocco
There are tremendous forces at work that will push silver over $100 an ounce.
According to the 2012 World Silver Survey, total global silver investment demand has risen from only 31.6 million oz in 2002 to a staggering 282.2 million oz in 2011.
As world economic fiat based monetary system continues to deteriorate, investors are taking delivery of physical silver rather than holding on paper contracts that may not be backed by any metal whatsoever.
This has created a run on the LBMA… the largest metal exchange in the world.
However, in just four months (May-Aug), the U.S. has exported 291 metric tonnes to the LBMA vaults in the U.K.. The United States has exported more silver bullion in the first seven months of the year than it did in all of 2011. Silver bullion shipped to the United Kingdom rose from 3% of total U.S. silver exports in 2011, to a staggering 42% of the 700 million oz exported so far this year.
More likely than not, the large silver bullion exports to the U.K. have been utilized to help meet the insatiable physical silver bullion demand taking place on the LBMA. As the old saying goes… where there is smoke, there’s probably a great deal of silver paper on fire.
Once the world ‘s liquid energy supply starts its inevitable decline from its current plateau, annual silver metal production will decline as well. There will be no silver glut and there will be no silver available when the world’s fiat monetary system finally dries up and blows away.
Get ready. The forces for pushing silver over $100 have just begun.
There are tremendous forces at work that will push silver over $100 an ounce.
Very few precious metal analysts understand all the forces that are at work. Some analysts focus on specific areas such as the gold-silver ratio and technical analysis, while others write about future investment and industrial demand. And then of course, we have the more unorthodox analysts who delve into the ongoing manipulation of gold and silver — a realization shared by the author of this article.
However, one of the most important aspects of silver that most analysts are completely unaware is the availability (or lack of thereof) of future silver mine supply. I am simply amazed how some analysts can forecast lower silver prices due to a so-called future supply glut that is supposedly coming in the next few years.
As I have mentioned before in a previous article, analysts today are so specialized they have no idea what is going on in another industry. It is highly doubtful that the metal analysts who make these long term silver supply forecasts really comprehend the details of the energy market and industry. The failure of these metal analysts to understand the complexity of the global liquid supply system will render their future forecasts completely inaccurate. This will be discussed at the latter part of the article as it is one of the longer term forces to impact silver.
Silver Surplus-Deficit Explained Again
There still seems to be a misunderstanding about the so-called surplus-deficit of silver.
Some analysts are pointing to the fact that increasing annual silver surpluses, without continued strong investment demand, can make the price of silver fall quite rapidly. I would like to repost this graph to show the surplus-deficit forces.
According to GFMS (now Thomas Reuters), there was a silver deficit until 2003. During this time of supposed deficits, the price of silver remained in the $4-$5 range. However, when the deficits disappeared and the surpluses began, the price of silver magically began to rise.
The first year silver was no longer in a deficit (2004) it hit an average price of $6.67 an ounce. Then in 2005 it reached an average of $7.32, $11.54 in 2007, $13.38 in 2008, $14.98 in 2009 and so on and so forth.
The white line on the graph represents the average annual price of silver. As you can see the price is heading higher in parallel with the so-called rise of silver surpluses. These silver surpluses have been absorbed by institutional and retail investors. The notion that a structural deficit in the annual silver supply would push the market price of silver higher, failed to materialize prior to 2003 when actual deficits took place.
So, here we can see that the rise in the price of silver since 2004 has less to do with industrial demand and more a factor of increased silver investment.
Silver Investment Demand: Just Getting Started
Precious metal enthusiasts who are concerned about whether or not silver investment demand will remain strong in the future… shouldn’t be. From the data I am gathering, we are just beginning to see how large of a force silver investment demand will be in the upcoming years.
One of the more notable gauges of increased silver investment over the past decade, has been the growing demand of official government coins. In 2002, total supply of official government coins and medals were 31.6 million ounces. However, by 2011 this grew to a staggering 118.2 million ounces or a gain of 274% in just nine years.
The four largest selling official government coins are the U.S. Silver Eagle, the Canadian Silver Maple, the Austrian Silver Philharmonic and Australian Silver Koala & Kookaburra. These four government mints produced 101 million silver ounces of coins & medals (majority were coins) or 85% of the world’s total in 2011.
Even though the sales of these official coins dropped off during the first part of year, strong demand has returned in the second half. For instance, there was a 32% decline in Silver Eagle sales in the first six months of 2012 when 17.4 million were sold compared to 22.3 million during the same period in 2011. However, if we look at the chart below we can see that 2012 Silver Eagle sales are now only down 18% compared to the same time last year.
There was also a similar decline of Silver Maples in the first half of 2012. From January to June, sales of Silver Maples fell 32% compared to last year. Nevertheless, when the Royal Canadian Mint releases its third quarter report, we will more than likely see an increase of its Silver Maple sales in percentage terms compared the first half of 2012.
Another interesting trend taking place and shown in the chart above is the amount of Silver Eagles sold compared to Gold Eagles. Compared to last year, Gold Eagle sales (-36%) are down twice as much in percentage terms than sales of Silver Eagles (-18%). Furthermore, the U.S. Mint has sold 53 times more Silver Eagles than Gold Eagles in 2012 (the ratio in 2011 was 40-1). Thus, retail investors have been purchasing 33% more Silver Eagles than Gold Eagles compared to the same period last year.
Even though the four countries listed above produce the lion’s share of official government coin sales, there is another country that has big plans to change their ranking in the future.
China: Big Plans For Future Silver Investment
Continued: THE FORCES THAT WILL PUSH SILVER OVER $100 | SilverDoctors.com
