Silver Supply News?

[AGgressive Metal]

I remember many times hearing about supply crunches and panics over the entire length of the silver rally over the last 10-12 years. Lately it seems there is plenty to go around - you can barely get more than COMEX spot for better-than-average physical and forget about getting more for generic, other than maybe 50 cents over for brand new stuff retail pricing.

I'm wondering if the spike up to @$40 and the time silver spent in the 20s-30s didn't bring out a bunch of metal that we are still working through. When you think about the big picture, we moved from $4 to $19.20 today relatively quickly. I think it will take another major financial event to light a fire under silver - which in today's world could happen anytime, but it feels like the "fundamentals" have actually asserted themselves and found a somewhat reasonable market value, based on what physical is selling for these days compared to spot.

Anyone have any insights?

[AGgressive Metal]

I'm interpreting the silence on this post as indicative of neutral/pessimistic market sentiment, ha ha

[wolvesdad]

So I thought the fundamentals we're going to see the collapse or severe reaction to the dollar 8 to 9 years ago.

I thought the monkeys that swing the numbers would not have been able to keep their game going for very long BACK IN 2006-2008. But it is now 8 to 10 years later, and they have continued to carry the ball. Which really they had already been carrying the ball and manipulating the market for the 20 to 40 years prior to now.

So what does it all mean? To me, it means I should have put my same cash and time into a revenue producing investment. I would now be much better off. But tuff.

Do I sell? I hate to at $19-$21. I know the dollar fundamentally is not that strong. But do I hold and wait until ?????? These monkeys have Staying Power.

It could all fall apart (a single 10% - 50% revaluation of the dollar) in 2 months, or in 40 years. Who knows.

I still want to buy at $16-$18. I feel that's a steal. But will we see $30 or another spike in the next 2-5 years. Who knows. I've always been a poor gambler. And as long as the monkeys run the wheel. That's all we are doing when buying silver for the mid term. Long term, I am still confident that those who hold physical metals will fare so much better.

But those that will do the best, are those that make their money work for them, and then put a regular, but small amount into precious metals as they take profits on their investment.

[wolvesdad]

I know Buttler's supply numbers must not be completely legitimate or accurate. Or we would have run out of supply by now. And I also know from first-hand, that they are pulling the physical Ag Metal out of the ground in Peru hand over foot. They can make money doing so at as little as $9/oz.

So!?

[natsb88]

Industrial use is a much bigger factor in the demand for silver than it is for gold. The economy here (and globally) is slower than any government will admit.

Vertical integration is bringing wholesale prices to the retail market. Think Elemetal. They now have the scrap buying and market trading infrastructure of NTR, the refining infrastructure of OPM (with a Brinks vault in the same building), an electronic waste / circuit board recycling division for precious metal recovery, a branch that deals in diamonds and stones from scrapped jewelry, the minting/production infrastructure of NTR in Dallas, and Provident as a direct retail outlet. Old jewelry and electronics are turned into shiny new bars and rounds under one corporate umbrella instead of passing through several independent businesses. CNT also hit the retail market with Bay Precious Metals on eBay. Brand new silver for <$1 over spot was a "hot sale" price five years ago. Now it's the norm.

[everything]

I think silver will hold up well, it's going to be needed. Their is plenty of it left in the ground. I thought I read somewhere a geologist says less than 1% of the worlds silver has been pulled out of the ground, we are still going after the easy stuff but the oceans haven't been touched yet either. Their will never be a supply crunch, talk is so, so cheap.

http://www.mining.com/wind-solar-power- ... al-decade/

[68Camaro]

I think silver will hold up well, it's going to be needed. Their is plenty of it left in the ground. I thought I read somewhere a geologist says less than 1% of the worlds silver has been pulled out of the ground, we are still going after the easy stuff but the oceans haven't been touched yet either. Their will never be a supply crunch, talk is so, so cheap.

http://www.mining.com/wind-solar-power- ... al-decade/

They mine the "easy" stuff because the non-easy stuff is too expensive to get. The costs are directly related to both the absolute cost of energy per unit and the actual energy needed per oz of metal. For every increment in price there is more metal theoretically available but the energy cost to recover it goes up exponentially. If it was easy people would already be doing it. Yep, talk is cheap.

[InfleXion]

I've had the belief for some time that if and when there is a true physical shortage of silver that it would coincide with the end of the current US dollar, because I think those two things are codependent. If the dollar goes away, then there's no need to suppress the price of metals to stifle currency competition. Alternatively if the price of metals goes through the roof as it likely would in a true shortage, then metals would be a more attractive currency and would probably cause a lot people to divest out of dollars for the more lucrative hard money.

In my mind it's a chicken and the egg question as to which will come first. I don't think the shortage will come first, because I don't believe people at large are educated enough to seek out sound money without an ulterior motive such as profit or fear of loss of profit.

I'm speculating that the supply shortage will only happen after the big players are done with the need for the dollar (done with using the US as their global errand boy), done with their need to suppress the price of competing currencies, and probably the biggest factor being when China is done accumulating all the cheap gold they want and decide to dump the rest of their USTs. Until then the bullion exchanges keep the price low so China wants to keep buying our debt to enable us to provide them with cheap gold prices.

As much as I've followed Ted Butler and do believe a shortage is coming, ultimately I think that would require a steady investment demand since industrial demand alone isn't enough to exceed mining supply, and unless there is an actual shortage it can all be settled with futures, promises to pay, or payment in dollars.

If people at large are always willing to accept substitutes, then there would never be a shortage, but at some point when the fiat dollar finally does run its course I expect commodity backed currency to become the norm once again. Again though, if people are willing to use the dollar, it doesn't really matter how worthless it might become. In my mind negative interest rates are enough to make any thinking person get away from holding such a currency for anything other than a means of transacting, and yet so far that hasn't been enough to turn the tables probably because the average person is in debt and is not actually a saver who owns a dollar to vote with. So I think it will take some nation (China and Russia) deciding to go back to hard money before people will take enough notice for supply to become a real issue.

[68Camaro]

I've had the belief for some time that ...

All good points. While these triggers might delay for years I also believe the world is starting to approach some of those trigger points, and when a major domino falls there will be no holding up the rest of the line. The various powers are holding an unstable system relatively steady, but there is a limit to what they are capable of, or willing to do. It may trigger by an accident (a true black swan with unintended consequences), or it may trigger when one of those contributing to the stability decides it is in their best interest to pull out and let the destruction happen in front of them so they can come in after to clean up and take over.

[everything]

I don't see a shortage, I see more being pulled out of the ground as demand increases. What I see is physical demand gone up from 50 million ounces per year back in 2006 to nearly 300 million ounces today. All these countries are finding more silver, or mining more silver, and it's a biproduct as well, so it's plentiful. Plenty of untapped sources to, environmentalist are holding it back as well which I'm sure has some contributory cost. Fact is global mining supply has increased 13 years running now.

[everything]

The spike did bring out lots of scrap, page 42. Biproduct costs are around $7, and for silver miners it's about $12 to pull it out of the ground and it's getting easier to pull it out, probably technology, and well, it's profitable, look how well silver miners are doing, some are considering dividends. We have the most above ground supply as ever, 25 months worth. I've pulled back on .999 investment, well .. sort of. I consider how many ASE sold last year, 47 million, that's about 3/4 billion $ just in ASE sales, puts my stacking to shame. But, who can afford the premiums on ASE, not those of us who are trying to increase our oz. counts.
https://www.silverinstitute.org/WorldSi ... ey2016.pdf

[68Camaro]

Read the same report. Came to a different conclusion.

[InfleXion]

I don't see a shortage, I see more being pulled out of the ground as demand increases. What I see is physical demand gone up from 50 million ounces per year back in 2006 to nearly 300 million ounces today. All these countries are finding more silver, or mining more silver, and it's a biproduct as well, so it's plentiful. Plenty of untapped sources to, environmentalist are holding it back as well which I'm sure has some contributory cost. Fact is global mining supply has increased 13 years running now.

The measuring stick is whether the amount of global mining supply is enough to offset both industrial and investment demand for silver. For many years in spite of the global mining output increasing it was still an insufficient amount of supply to satisfy demand, and relied on existing scrap metal coming to market (weak hands being willing to sell). I don't know the current state, but mining output alone is not a meaningful number.

It does feel like sentiment (and thus likely demand) has been down the last few years, and I wouldn't be surprised if we didn't really need the scrap as much lately.

However, many major mines were closed last year and that ought to have a trickle down effect for silver mined as a byproduct. These mines will not quickly come back online if and when demand warrants their production.

Another factor unique to silver is known as epithermal deposition. It was only deposited near the surface of the Earth's crust (I forget if it's due to molecular density or melting point) when the planet was formed. Gold will continue to be found the deeper we go, but silver becomes increasingly difficult to maintain the output per energy cost the deeper we go, and we've already gotten all the low hanging fruit.

There is also some amount of silver investment in SLV or miners that actually detracts from physical demand. Without these investment proxies we might have experienced a shortage already.

[everything]

With a record 25 months supply above ground, already mined, I don't understand how you guys can think we have a shortage and with pulling record ounce numbers of silver out of the ground too! 2016 isn't going to see much of an increase, obviously the QE's are running their course, everyone is getting maxed out on CC and mortgages, cars, etc. Heck, car/truck bubble is a trillion dollars now. They close mines because they are not profitable, it's not like the silver ran out, some people just don't know how to run a profitable business. Their are reserves they have not even found, they still find oil all the time. What do we think they've done drill samples all over the world and determined this is it? Of course, up in Alaska, they are itching hard to mine silver and gold but the wilderness is so pristine, let these other countries do it, and places like Peru, and China are stepping up, they got an economy to run, here in the U.S. we have the world reserve currency, we just print and borrow instead. Do you guys have citations for these shortages?

[68Camaro]

The word "shortage" has been debated here before and seems to have several completely different - almost opposite - definitions. So let's not use that word, but be more specific.

To start... I believe we've hit peak mining production - at least in the near-term and for prices that are somewhere close to $20/oz. For the past 5 years the miners have been cherry picking their easiest to reach, highest yield areas - stopping pull of ore from regions of their mines that are not cost-effective. That has enabled them to survive the lean years, but they are getting near the end of their storehouses of easy to get silver. No matter your belief that production will continue to rise, in fact 2016 mining production - despite near record low energy costs, and despite an increasing base price - is predicted to fall well below 2015 production. [Let me emphasize that production is falling despite lowered raw energy cost, and despite an increasing base price. Would the producers reduce production in the face of improved cost margins, if they had a choice? The answer to that is clearly no, and you don't need a reference to figure that out for yourself.]

If industrial use of copper and other silver containing ores doesn't drop (i.e., no global economic calamity) and the price of silver recovers back into the 30s - within a year or two you might see either a slowing in the drop in production, or maybe even a brief blip back up. But that's several years out, and it presumes a double assumption of no global crash along with a price rise.

Silver price rises in the face of a global crash and/or major war will still not precipitate increased production because so much of silver production is from by-product ore. So... no "shortage". But I see decreased mining supply, increased mining costs, and - I believe - continued increased investment demand. On the other hand, if industrial demand crashed faster than investment demand, we could see a flood of silver that would need to be sopped up by other demand. I think in that scenario investment demand would go up 10x and completely swamp the availability from reduced industrial demand plus any recycle that might be found. That's just an opinion - others are free to believe anything else they want.

Quotes from geologists of the theoretical amount of silver (or whatever) in the world amounts to blowing into the wind. It matters not. There are large supplies of many items - energy, uranium, gold, water, oil. What matters is the combination of both the cost of getting that item out of the ground (in this case silver) and the demand for it.

[everything]

Times change fast. http://www.silverinstitute.org/site/200 ... e-in-2008/

Wasn't long ago, when oil was high priced talk of peak oil was all over the place. Because it takes so long to ramp up miners they go in cycles, I have heard said ten year cycles, since silver is also associated as a base metal, it fits in here. Many gold investors completely shun silver. The srocco report just had a story on the fall of copper, but that's been talked about for some time. Personally .. I think the cycle has completed, metals have found a realistic price range and I think we are stuck in it, I agree, we are probably topping out here, investment demand has it's limits, or does it? With the runup in price, miners are doing pretty darn good, equipment purchases were way up during this cycle, now .. falling. In the meantime with investment demand up six fold in ten years, we are literally swimming in silver. I don't believe the high grading theory, the vein goes bust they go find another one, half the battle is moving all the equipment and getting approval to go dig more holes in the ground, even I call before I dig, my brother busted his cable line just rototilling his garden.

[68Camaro]

"swimming in it" is a value judgment. It would take 7 years of global mine production - with 100% converted into coin - to just create enough eagles for everyone in the world to have just one of them. Put that way it doesn't sound like much, does it?

In fact that "insufficiency" (another value judgment 180 degrees from yours) has been one of the arguments (though there are practical options to implement) against the use of intrinsic value coin.

[InfleXion]

With a record 25 months supply above ground, already mined, I don't understand how you guys can think we have a shortage and with pulling record ounce numbers of silver out of the ground too! 2016 isn't going to see much of an increase, obviously the QE's are running their course, everyone is getting maxed out on CC and mortgages, cars, etc. Heck, car/truck bubble is a trillion dollars now. They close mines because they are not profitable, it's not like the silver ran out, some people just don't know how to run a profitable business. Their are reserves they have not even found, they still find oil all the time. What do we think they've done drill samples all over the world and determined this is it? Of course, up in Alaska, they are itching hard to mine silver and gold but the wilderness is so pristine, let these other countries do it, and places like Peru, and China are stepping up, they got an economy to run, here in the U.S. we have the world reserve currency, we just print and borrow instead. Do you guys have citations for these shortages?

I don't understand how you can think we have a record supply above ground when the US government stockpile which used to be massive is zero. Just because CME stockpiles (which are insufficient to meet their leverage) are growing doesn't show the big picture, and that leverage is a key component of this scenario because without leveraged proxy contracts the likelihood of a physical shortage would be far greater than otherwise. I've never stated there was a shortage, so I don't have any citation to provide.

"Obviously the QE's are running their course": Now there's an interesting statement.

You do realize that Japan is 2 decades ahead of us with QE and that their economy is in dire straits? They can't even pledge to hit 2% inflation in any amount of years. Deflation is killing them because QE is market inflation by coersion, and markets always seek equilibrium.

You do realize that negative interest rates have the same effect as QE whether or not QE is officially occurring? The only difference is that the money being created isn't being used to directly buy Treasury bonds, but it still has the same inflationary effect by creating money from nothing.

You do realize that the only reason QE has not had the same level of consequences for us as Japan is because we are exporting the consequences of that to other nations via petro purchases, that this has already incited bilateral agreements by other nations to undermine us, and that the USD being the global reserve currency is on borrowed time?

You do realize that China is a net importer of gold and silver, and that their production is moot for available global supply?

Are you seriously trying to say that mines were closing because of management and not a global deflation due to QE whiplash?

Also, you don't have to believe in high grading theory for it to be a reality (It's not a theory by the way). I'm not a big fan of the "religion of science" (Freud and Keynes come to mind, but I digress), but in cases such as this where we know how planets are formed and can measure output over time it's silly to dismiss. Chances of there ever being another Comstock Lode are minimal. Humanity has had millenia to locate all the easy to mine silver already near the surface, although you do make a good point about Alaska since the tundra is largely unexplored even though cost of production for breaking through tundra is also higher obviously. However, it's not a matter of a vein going bust. It's a matter of subsequent veins being deeper in the ground with less supply per vein baking a cost of production increase into the cake. While this isn't directly impactful because silver is mined as a byproduct, it does mean that less silver will come out as a byproduct as compared to energy cost to get it out.

Ultimately there will always be enough silver. The question is what price will it take to make it profitable to get out of the ground, and maybe more importantly, does silver even need to be profitable since it's mined as a byproduct and largely unwanted by the population at large for investment? Unless industrial demand alone can outpace mining output, or unless governments embrace a metal backed currency in the future, it may be possible that silver doesn't need to be profitable to come to market.

My understanding has been that the global mining output has at times been insufficient to meet global demand from industry plus investment, and if that trend were to continue that the price must eventually rise to make silver mining more profitable or invoke holders to liquidate for profit. Right now that trend is bucking because industry demand is down due to global deflation, and investment demand is down because most people tend to buy in a rising market to ride the wave instead of doing research and investing based on convictions.

The contention is that the silver market is a powder keg, because roughly $30-$40 billion could buy up the entire global physical supply which is peanuts on the grand scheme. That's basically one month's worth of QE. Just because there is silver doesn't negate the risk of potential shortage being worth consideration. If and when there is a shortage, there will be no opportunity to go back and buy at today's prices. It will be a game changer. Maybe it won't happen, but if it does the train will have already left the station.

One last note, QE is debt creation. What we call "dollars", which do not meet the legal definition, are debt. Treasuries are debt. All loans are a double whammy of debt because the central bank creates debt based currency out of thin air, then loans it to the brick and mortar bank which holds it on their books as an asset even though it is debt which they then transferred to the loanee. The financial system is riddled with vacuous debt based IOU derivative assets to the tune of around $2 quadrillion which far exceeds the total value of all combined global assets. According to the Austrian school of economics, gold and silver are the ultimate extinguishers of debt. If and when the financial system ever has to pay its debts, it stands to reason that the price of gold and silver will adjust accordingly to absorb that debt regardless of the supply picture, as has happened in prior monetary cycles throughout history when faith is lost in debt based currency and must be restored by an asset backed currency.

[68Camaro]

...

To start... I believe we've hit peak mining production - at least in the near-term and for prices that are somewhere close to $20/oz.

...
No matter your belief that production will continue to rise, in fact 2016 mining production - despite near record low energy costs, and despite an increasing base price - is predicted to fall well below 2015 production.

And... it did.

http://www.kitco.com/news/2017-05-11/Si ... Study.html

[AGgressive Metal]

Yep, silver is having a little rally today up 0.75% - hopefully will see $20 this year or at least higher prices

[johnbrickner]

Some of us are mentioning substitutes for silver . . . most likely in an industrial way. How about as an alternative to a declining dollar. Hence cryptocurrencies. Cryptocurrencies obviously an alternative to the dollar. Also, many are looking to them as an investment to make $$. Similar to PMs.

What if we take the market value of the cryptos and say it was used to buy in your hand silver? Now are we talking shortage?

[JadeDragon]

It would take 7 years of global mine production - with 100% converted into coin - to just create enough eagles for everyone in the world to have just one of them. Put that way it doesn't sound like much, does it?

Ok, but 95% or more of people around me don't own silver coins, don't know they should own silver coins, can't afford silver etc etc. Most people have little inclination toward serious PM investing. I even showed part of my stash to my own mom and she wanted to know "how can you get your money back?" In poorer countries, it's even higher numbers with no inclination to invest in silver. Granted, most people know silver and gold has value and is "expensive" but they are not buying Silver Eagles and Maples. My ability to make up for all all the people that are not buying, to average out to 1 oz per person per year, is somewhat lacking.

[JadeDragon]

What if we take the market value of the cryptos and say it was used to buy in your hand silver? Now are we talking shortage?

I own zero crypto currency... I buy Silver.

[68Camaro]

It would take 7 years of global mine production - with 100% converted into coin - to just create enough eagles for everyone in the world to have just one of them. Put that way it doesn't sound like much, does it?

Ok, but 95% or more of people around me don't own silver coins, don't know they should own silver coins, can't afford silver etc etc. Most people have little inclination toward serious PM investing. I even showed part of my stash to my own mom and she wanted to know "how can you get your money back?" In poorer countries, it's even higher numbers with no inclination to invest in silver. Granted, most people know silver and gold has value and is "expensive" but they are not buying Silver Eagles and Maples. My ability to make up for all all the people that are not buying, to average out to 1 oz per person per year, is somewhat lacking.

My comment was just a word illustration of how little silver exists above ground, nothing more. But your reply noting how few people have PMs (especially in the west) is a good different illustration of how quickly a modest shift in buyer interest would increase demand to the point where the market manipulation that is keeping the price artificially depressed would be made infeasible.

I'm not sure that the population of poor countries have no interest, versus no means. The populations of India and China - both with large depressed segments of their population - generally value PMs and buy when they can (though possibly more as jewelry). Other countries that are even more poor simply have nothing with which to buy - not even being able to buy enough food in some cases - they are in survival mode, PMs not being an option.

[beauanderos]

the wherewithal to purchase precious metals fits somewhere higher up a hypothetical Maslow's hierarchy of needs. When you can't put shelter over your heads, struggle to put food on the table,
have little education or are maxed out paying back for the one you did obtain (because of the difficulty in finding gainful employment) ... then purchasing metals IMO is probably pretty close to
Saving the Whales or preventing deforestation in the minds (or absent one's thoughts entirely) of most people.

Has that deterred me from building a stash? No, but I have enough for the purposes for which it was amassed. It's now well past the time (for me) to move on to other things and quit
obsessing whether it will go up or not, or by how much, or how soon. It is what it is, and my life won't be ruined if it never moves up from here... whereas matters might actually prove more
challenging if we were actually suddenly quite wealthy.

But, should that indeed happen, at least I could start looking to buy a cabin in the woods somewhere.

Somewhere with a temperature cooler than the freakishly hot climate of Fresno!