Is there a coming Silver Shortage?

Is there a coming Silver Shortage?

We all tend to still think of the value of Silver being set by the Paper Markets ie: the daily spot price.  But this is not it's real value. This is because for every 100 ounces of Silver sold on the paper markets, there is only 1 physical ounce available. So if "value" is related to "demand" the price of Silver should be much, MUCH higher. Sometimes this shortfall in the actual Physical Silver shows itself in the market so clearly, it wakes us up.

On November 5th the US Mint sold out of 1oz Silver Eagles. As the price of paper silver falls, bringing for the moment Physical Silver with it, the demand for Physical Silver explodes.  To put into perspective, on November 5th the US Mint started the day with an inventory of 2 million Silver Eagles and they completely sold out in... 2 hours! 

But I still wouldn't call this a "Shortage".  It is probably more accurate to call it a "Supply Deficit". This is because while the paper price remains lower, the mining companies and refiners hold back their supplies until the price rises.  Mike Maloney explores this current shortage is the following 4 minute video if you would like to listen further.

A Gold and Silver Company "GoldSilverWorlds" in the US explains:  "There is a supply deficit of physical silver. In 2013 demand for physical silver exceeded supply by 103 million ounces. 103 million ounces deficit is about 10% of the total supply. Last year total mine production for silver was 819 million ounces, yet demand was 1.1 billion ounces. The total shortfall was 262 million ounces." 

If you've ever wondered why the phone companies would like your old phone, it's because silver is used in many electrical products, solar panels and medical equipment. A few weeks ago I and my CEO Caroline Peers met with the Head of UK Operations for Umicore and asked him from which refiners he sourced the majority of his raw materials.  An important question to ask in positioning ourselves as a company, where overnight supply can halt due to particular geo-political forces.  His answer suprised me. "E-scrap".  At the moment, the balance of the amount of precious metals re-created from Electronic Scrap roughly balances the demand for new coins and bars from Umicore.  This is why we, as high street consumers, are always encouraged to "trade-in" our old models of electronic gadgetry.

I joked that if we all for one month DIDN'T buy a new phone, but instead invested the money in Physical Gold and Silver, then within a short space of time the price of those metals would go up, because we would have collectively shrunk the pool of e-scrap, which would in turn raise the price of producing Gold and Silver! So it would be a much better investment - as a nation of people - to buy Physical Gold and Silver than to buy a new phone.  Then you could sell some of your metal back and buy the phone with the profit whilst keeping the remainder of the metal.  He looked at me slightly puzzled by my idea of collective purchasing-power, and laughed: "You've just summed up how macro-economics work!"

And in the US something is already going awry with their recycled Silver figures:  

  1. Recycled Silver supply last year fell by 24%, the largest drop on record!  
  2. 7 out of 15 of the leading primary silver mines produced LESS silver in 2013 than they did in 2012.
  3. Nevada, the silver state, produced only 7.4 million troy ounces in 2013, compared to 25 million troy ounces in 1997.
  4. On the demand side, physical demand rose by 13%, so much so that the U.S. mint literally sold out! 
  5. China, who in 2005 used less than a million ounces of silver for solar panels, absorbed 35 million ounces for solar in 2013.
  6. 62% of silver is used for industrial applications like nearly all of our electronics, biology, medicine, and other commercial uses. 21% is used for jewelry and 12% for coins.
  7. 95% of all silver consumed is gone, never to enter the supply side again. (Gold Silver Worlds market analysis).

"This silver manipulation by the worlds largest banks, supported by the CFTC, U.S. Treasury, and Federal Reserve has been so successful, that they have not only crushed the price of silver in spite of rising demand, but they have crushed the mining shares and future investment capital for the entire sector.  Simply put, the silver shorts will be squeezed due to a real physical silver shortage that is upon us, when this happens, all hell will break loose in both the paper and physical precious metal markets. Your opportunity is to own silver today, for less than the cost an actual mining company can even produce it for. This is investment is not an IF question, but a WHEN question."

At Bleyer we hold a wide variety of Silver Coins and Bars.  We also work with a number of suppliers, so that we have alternatives if a shortage in one supplier develops.  

We currrently have all the following 1oz Silver Coins available for next day delivery:

  1. Britannias
  2. American Eagles
  3. Canadian Maples
  4. The beautiful Silver Austrian Philarmonikers  
  5. We also have in stock the stunning 1oz Lunar UK Silver Coin, Year of the Horse
  6. Browse our Gift Ideas for smaller Gold and Silver products
  7. Keep an eye on our Special Offers page for the best prices on Gold and Silver products in stock for next day delivery.
  8. A wide variety of Silver Bars from 100g up to 15 kgs.  

 

For details of all our Products please browse our website or call one of the team for a friendly informal chat on 01769 618618.

Leave your comment