Critically High U.S. Silver Supply Reliance In Jeopardy When Paper Markets Crack

The U.S. silver supply will likely be in jeopardy in the future when the highly inflated paper markets finally crack.  This is not a matter of if, but WHEN.  If we consider the top two precious metals and copper, silver has the highest net import reliance as a percentage of domestic consumption.

According to the data put out by the USGS – U.S. Geological Survey, and the GFMS team at Thomson Reuters, 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:

The USGS reported that of the apparent 8,100 metric tons (260 million oz) of total silver consumption in 2015, the United States relied on 6,156 metric tons (198 million oz) of foreign silver imports to meet total demand.  As we can see this was nearly the opposite percentage for copper.  The United States only relied upon 36% of copper imports to meet its total copper consumption in 2015.

Now, for gold… it’s a much different story.  The USGS did not provide any net import reliance percentages of total consumption for gold due to the following footnote in their 2016 Gold Commodity Summary:

The United States has been a net exporter; however, large unreported investor stock changes preclude calculation of a meaningful net import reliance.

Taking this into consideration, I came up with my estimate of U.S. gold net import reliance as a percentage of consumption.  While it is difficult to estimate “Investor gold flows” in and out of the United States, I focused on total demand versus total supply.  I used the data from GFMS 2016 Gold Survey and the World Gold Council 2015 Full Year Demand Trends Report.

Yes, I realize these figures may be corrupted, manipulated or inaccurate, but it is the best we can go by to get a BALL PARK figure.

NOTE:  Different official reporting sources post figures in metric tons and ounces.  Here is the conversion for metric tons (1 metric ton = 32,150 troy ounces).

In 2015, the United States produced 216 metric tons (mt) of gold and had additional scrap supply of 70 mt to equal 286 mt.  According to the World Gold Council, total U.S. gold demand in 2015 was 193 mt.  Thus, the United States had an extra 93 mt of gold above and beyond its “supposed” consumption.  If we divide the surplus 93 mt into total consumption of 193, it equals 48%.

This allowed the United States to export that extra gold to Eastern countries.  Why?  Because, most Americans believe gold is a “Barbarous Relic”, due to the brainwashing by the Einsteins at CNBC, Bloomberg and Fox Business.

The U.S. Silver Net Import Reliance Has Surged Since 1999

In 1999, the United States only relied upon 39% of its total silver demand from foreign import sources.  According to the USGS figures, the U.S. relied upon 2,145 mt (69 million oz) of foreign silver imports to meet its total demand of 5,500 mt (177 million oz) in 1999.

However, as time went by, U.S. silver import reliance as a percentage of total consumption increased to a record high of 72% in 2015:

Since 1999, the United States silver net import reliance has increased from 2,145 mt (69 million oz) to 6,156 mt (198 million oz) in 2015.  Now, a majority of that increase is due to AMERICANS BUYING lots of physical silver investment.

This chart below says it all.  In 1999, total U.S. physical silver investment (my estimation including GFMS 10.7 Moz of Official Silver Coin sales) was 15 million oz (Moz) versus total demand of 177 Moz.  However, Americans purchased a record 100 Moz of physical silver investment in 2015 versus 260 Moz of total demand (GFMS 2016 World Silver Survey):

Thus, U.S. physical silver investment surged from only 9% of total domestic demand in 1999 to 38% in 2015.  As we can see, the BLUE area in the chart above stayed about the same, while the SILVER area increased significantly.  Matter-a-fact, if we subtract physical silver investment from total demand during these two periods, this would be the result:

1999 Total Silver Demand – Physical Silver Investment = 162 Moz

2015 Total Silver Demand – Physical Silver Investment = 160 Moz

Basically, the big increase in total U.S. silver demand has come from the surge in American physical silver investment since 1999.

That being said, U.S. silver net import reliance surged even move than the increase in American physical silver investment demand in this sixteen year time period due to falling mine and scrap supply.  For example, the U.S. produced 1,600 mt (51 Moz) of silver in 1999, versus 1,100 mt (35 Moz) in 2015.

One more very interesting data point.  According to GFMS, Americans purchased 2.3 Moz of physical gold investment versus 100 Moz of physical silver investment in 2015.  Thus, for every once of physical gold Americans invested in 2015, they purchased 43 oz of silver. 

The data and figures shown above presents a serious situation for Americans who want to invest in silver when the highly inflated paper markets crack…. and crack they will.  Today, we are watching the gold and silver price surge higher while the Dow Jones Index falls 150 points from its CLIFF upon the MOUNTAIN OF DEBT that it rests.

I have to tell you all, this will get very ugly when the markets finally succumb to the forces of gravity and the true fundamental financial laws… which we haven’t followed for quite some time.  And yes, keep an eye on the ENERGY MARKETS.

Even though the DRILLING RIG GERBILS are running faster to produce more oil in the United States currenty, this is not sustainable over the long haul.  Unfortunately, there is a lot of LOUSY ENERGY ANALYSIS in the media which is misleading investors to believe the earth has a CREAMY NOUGAT CENTER of oil…. for the taking.  Thanks to James Howard Kunstler for that wonderful definition of abiotic oil.

I will be providing articles and reports in the future showing why DEEP ABIOTIC OIL is a RED HERRING and will not save us from the oil collapse heading our way.

IMPORTANT NOTE:  I will be putting out a new Tom Cloud Precious Metals Update tomorrow.

Lastly, if you haven’t checked out my newest guest post, Dow Companies Report Worst Revenues since 2010, Dow Rises to 20,000 (LOL?), I highly recommend it.

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26 Comments on "Critically High U.S. Silver Supply Reliance In Jeopardy When Paper Markets Crack"

  1. “Critically High U.S. Silver Supply Reliance In Jeopardy When Paper Markets Crack”

    as long as they can import it for fiat debt, the supply will continue. and if they can’t import it for fiat debt any longer, well, they won’t be importing much else either, and silver will not be on anyone’s mind.

    • DisappearingCulture | January 31, 2017 at 5:04 pm | Reply

      The price of silver has been supressed so hard I suspect the price going up substantially will closely correspond with a SHTF financial chaos time. It may not be bad everywhere at the same time. Yeah in a Mad Max scenario silver may not be worth much. But if there is any industry that uses it [it is essential for hospital sanitation] there will be in some demand. Outside of total chaos it is one thing that is highly liquid for currency if there is a bank lockdown/holiday, or whatever one wants to call it.

      • “highly liquid for currency if there is a bank lockdown/holiday”

        true. there might be great utility to it on the way down, when the financial system is crashing but the economic systems are still on-line. kind of like when you chop off a chicken’s head and the body still runs around.

      • Your typical internet nonsense by those who promote metals. It is simply cheaper to import metals from countries because of the strong dollar by wholesalers and large retail jewelry chains and implying that all of a sudden Americans have gotten a huge desire for metals is just nonsense.
        So many have bought into the manipulation nonsense and most are under water as it is used to justify to clients why metals have been going down for the last year and not up. A strong dollar equates to most commodities going down including gold and silver. For some reason these people have been brainwashed into thinking that they are divorced from the rest of the commodity pool and prices should just keep rising. Markets just don’t trade that way as when price rises to a certain level demand falls and then price.
        The FED could care less what the price of gold and silver are as dollar strength is determined by international capital flows. The idea that gold is suppressed to instill dollar confidence is absurd as the FED has been attempting dollar weakness for over a year but due to global forces they have been unsuccessful until recently. Gold could go to $10,000 and this would not change the demand for dollars as the international financial community is entrenched in dollar based assets. 50% of all international trade is still settled in dollars and 75% of all international financial transactions are done in dollars which always guarantees a demand for both treasuries and dollars. Trillions of dollar denominated debt to foreign entities also guarantee dollar demand.
        All regulated markets trade the same with HFT algos moving short term price in the opposite direction og the long term trend and then adding trades riding this trend. This is legal as it does not change the long term trend.If you look closely at those who promote the suppression nonsense it is mostly those that market metals on the retail level and those that sell subscription services. Most of these have no experience trading financial markets so they don’t understand what causes price movement.
        For months leading up to the holidays currency traders in London have been hammering the EUR/USD and GBP/USD crosses and driving up the USD/JPY cross causing additional dollar strength with NY creating short term dollar weakness when London closes and London at it again the next day. They have currently taken a break. When NY creates dollar weakness the HFT algos in the futures markets have been consistently driving the gold price up, adding trades and then riding price weakness back down. The algos were consistently driving price to around the 1362 bearish reversal level and adding trades. When London started to create dollar strength price moved from here all the way down to the 1240 bearish reversal level and then the algos were driving price consistently to the 1300 level and adding shorts. When London did not let up price moved from here down to the 1124 level where the algos were then consistently moving up price to the around the1200 level and then adding shorts. With NY again creating short term dollar weakness the algos have again drove price to around the 1200 level again currently at 1205. With the UK needing a weak pound for their exports look for them to start up again with the algos adding shorts riding price weakness back down again in the near future.
        This is how price movement in one market effects price movement in other markets as all are connected. It is all about international capital flows and has nothing to do with price suppression.

        • jj,

          While you said a lot in your comment, unfortunately, you don’t SEE THE FOREST FOR THE TREES. No where in your comment or argument did you mention ENERGY. I could give a rats azz about the DOLLAR. The Dollar is not the main driver of the world economies, ITS ENERGY.

          Again, you make a convincing argument, but you forgot to mention the most important factor… ENERGY.

          That’s okay, most people who focus on the paper markets tend to overlook that one… so I don’t blame you.

          steve

          • Benito Camela | February 1, 2017 at 11:52 am |

            I was reading his comment and thinking, where’s the EROI, bro?

          • This should be written on gold and silver coins.
            WARNING!
            This product may cause mental disturbances in others. Manifesting in anger and long windedness.
            Where does this emotion come from? They’re bloody coins for god’s sake.

          • “Where does this emotion come from? They’re bloody coins for god’s sake.”

            the coins make them realize that the paper is paper and that the digital entries are digital entries.

  2. Thanks Steve~~~~

    • 4 Oz I see you’re hanging out with the smart kids. Steve’s sharp stats belie his deeper understanding that energy is the key factor, found embedded in the actual gold and silver specie. I’m not saying that our precious metal stacks will buy energy when the EROI drops to unsustainable levels and oil is difficult to find in sufficient quantities to keep the wheels on and turning. But they might allow us to move to a warmer region as the Maunder Minimum mini ice age must be confronted in the next 5-10 years.
      Peak debt, peak government, peak oil, peak weather and peak MOPE make for a bad combination.
      PS the greatest increases in the world’s productivity, growth and GDP came when petroleum was discovered and produced in great quantities, allowing everyone in the world to enjoy an increase in their well being

  3. Great work as Always Steve ! Below petition to make Gold and Silver money again

    https://www.mmga.org/

  4. End of tax-free living in Saudi Arabia as oil revenues dry up.

    https://www.rt.com/business/375746-saudi-arabia-vat-gulf-oil/

  5. I trade futures and even though I own a lot of silver coins I don’t care if it goes up or down. I am more interested in the gold/silver ratio. But because silver investors have had the kitchen sink thrown at them lately I will give them some hope.
    Silver has broken a multi year descending wedge and is forming another smaller descending wedge. If it can break the massive wall of resistance at around 21 dollars there is daylight to 35 dollars with a hiccup at around 26 dollars.
    If it can break 35 dollars next stop is new time highs then a multi decade cup and handle pattern comes into play that technical analysis says will take silver to the mid 90 dollar range.
    If this happens silver could take on the irrational exuberance that bitcoin has enjoyed. Which could mean the sky is the limit as per bitcoin.
    A lot of ifs and buts but not all is doom and gloom. Personally I will not sell my physical silver for any amount of currency but swap it for gold when the ratio is suitable. I will swap paper futures contracts for paper currency and keep the physical for an emergency which, in my opinion, it is for. Gold and silver are not a lottery ticket but a hedge.

    • “when the ratio is suitable.”

      what ratio would that be?

      • For me 40 to 50 to 1.

        • (heh. remember when 50/1 was high?)

          why that level? historically it’s been, what, 19/1?

          and why at all? lots of people say there’s actually more gold than silver above-ground.

          • Many reasons
            1. 50 to 1 is the average of the last 100 years
            2. God does not tarnish
            3. Gold is more beautiful
            4. Gold is easier to transport and easier to hide.
            5 Gold is more acknowledged by the public eg gold medal v silver medal
            6 Because that is what i do.

    • DisappearingCulture | January 31, 2017 at 5:48 pm | Reply

      I rather enjoy the commercials’ short positions on the Comex, and how they play their hands, translated into [how it looks on] technical charting. Which comes first, the horse or the carriage?

      • I trade the 2 minute chart and I don’t care about what anybody is doing including the Comex. If the chart says go short I go short if it says go long I go long.
        All the information you need is there.
        It’s not the fundamentals that matter but everyone’s collective perception of the fundamentals that matter and all that is in the chart.

  6. Thanks Steve.

  7. Could get very interesting if Mexico says no to a silver tariff. Quite sure that other buyers more accommodating will show up quickly.

    • Great time for Mexico to start minting new silver pesos.

      “Negotiate” with all of the miners to “sell” all of their output for a year or two to the Mexican Government for current paper pesos and start minting New sterling silver pesos. New revalued pesos would solve a whole lot of Mexico’s problems.

      SteveW

  8. Hey Steve,
    Do you know which is the country that the US import most of the silver ? Just curious to see if it’s Mexico, if so they could fight back the future 20% border tax by restricting the export of silver to the US.

    • David,

      According to the USGS, the United States imported a total of 6,700 metric tons of silver in 2015. Of that amount, Mexico accounted for 54% while Canada came in second at 26%. So, the majority of Mexico’s silver production was exported to the United States in 2015.

      Furthermore, no Tariffs or Duties were imposed on imported unrefined or refined silver bullion. I don’t know if a 20% border tax would be levied on raw materials. To me, if a border tax would be imposed, it would be imposed on finished goods. This is where Trump wants to cut down on manufactured goods being imported into the United States.

      However, this is just my opinion on the matter.

      steve

  9. As per ZH, the following piece by Gail Twerberg has a very similar undertone to Steve’s arguments on the energy markets. We’re in for a rough ride (fall), so buckle up (a golden parachute).

    Thanks to Steve for all your efforts and sharing your analyses and insights. GLTA

    http://www.zerohedge.com/news/2017-01-31/destroying-wind-solar-will-save-us-delusion

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