THE UNKNOWN FUNDAMENTAL: This Will Push The Silver Price Up Much Higher

Precious metals investors need to understand the coming silver price surge will not occur due to the typical supply and demand forces.  While Mainstream analysts continue to generate silver price forecasts based on supply and demand factors, they fail to include one of the most important key forces.  Unfortunately, the top paid Wall Street analysts haven’t figured it out that supply and demand forces don’t impact the silver price all that much.

For example, I continue to read articles by analysts who suggest that industrial demand will impact the silver price in the future.  They believe that rising industrial silver demand should push prices higher while lower demand would do the opposite.  However, according to my research, I don’t see any real correlation.  So, why should industrial demand impact the silver price in the future when it hasn’t in the past?

If we look at the following chart, there doesn’t seem to be a correlation between global industrial silver demand and the silver price:

Here we can see that industrial silver demand only increased 17 million oz (Moz) in 2011 compared to 2008. However, the price more than doubled from $14.99 to $35.12.  On the other hand, as the silver price fell in half in 2015 versus 2012, industrial silver demand only declined by 30 Moz (600 Moz down to 570 Moz).  Thus, rising or falling industrial silver demand isn’t a factor that determines the silver market price.

Also, many analysts have suggested that a falling silver price would generate more industrial consumption.  Unfortunately, as the silver price peaked and declined in 2011, so has industrial demand.  Now, some readers may believe that the decline in industrial silver consumption is due to less silver being used in photographic applications.  While this is partially true, if we remove photographic silver usage from industrial demand, we can plainly see that industrial consumption of 529 Moz in 2007 was higher than the 517 Moz in 2016:

Regardless, forecasts for industrial silver consumption have been consistently wrong.  In an article I wrote back in 2014, I stated the following on industrial silver demand:

I have always stated that industrial silver demand, especially solar power demand, will not be much of determining factor in setting the price in the future.  Wall Street analysts continue to regurgitate that industrial silver demand will grow for the next 5-10 years.  Hogwash.

When the peak of global oil production takes place within the next several years, this will impact Global GDP growth.  Matter-a-fact, world economic activity will contract along with the decline in global oil production.  Which means, demand for silver in industrial applications will decline as well.

Here is a chart showing the forecasted growth of industrial silver consumption from a report by GFMS done in March 2011, for the Silver Institute:

GFMS Analysts projected that industrial silver demand would rise to 650 Moz by 2015.  However, If we look at the first chart above, global industrial silver fabrication declined over the past five years falling to a low of 562 Moz in 2016.  Even though silver consumption in Solar PV manufacturing may increase for a few years, I believe overall industrial silver consumption will continue to decrease, especially when the markets crack and U.S. and global oil production decline.

Global Silver Scrap Supply Running Low Even At Higher Prices

Global silver scrap supply has hit the lowest level in a decade.  According to the data in the 2017 World Silver Survey, global silver scrap supply peaked in 2011 at 260 Moz and fell to a low of 140 Moz last year.  That’s a 46% decline in just five short years:

The last time global silver scrap supply was this low was in 1990 when the market only recycled 135 Moz of silver.  And get this… the price of silver was $4.82 in 1990.  So, with a price nearly four times higher in 2016, silver scrap supply is about the same as it was in 1990.  Which suggests, the market has already recycled a lot of its easy and accessible silver scrap supply.

Understanding the changing dynamics of industrial silver consumption and silver scrap supply is essential for determining long-term valuations of the metal rather than short-term yearly price signals.  Which means, industrial silver consumption and scrap supply haven’t impacted the silver price as much as the price of oil.

As we can see in the chart above, the price of silver paralleled the spikes in the oil price.  Thus, the silver price was based more on the volatile oil price rather than supply and demand fundamentals in the silver market.  However, it is important to know how the individual silver supply and demand sector fundamentals are changing over an extended period.

For example, Net Government silver sales supplemented the market for many years:

While Central Banks sold a lot of silver into the market, the extra supply didn’t impact the silver price as much as the surging oil price.  Although, the important factor to understand about the liquidation of Central Bank silver stocks is that most of this supply has already been sold into the market.  According to the data from the 2017 World Silver Survey, Central Banks didn’t sell any silver into the market over the past three years.

Here are three important takeaways from the chart above:

  1. Central Banks supplemented the market with much-needed silver, but this supply is now mostly depleted
  2. Central Bank silver sales should not be a fundamental used to determine a short-term silver price, instead, show how the lack of future government supply will impact the market.
  3. Central Banks held a great deal of old official silver coins as stocks for decades.  The United States had the most, but this was liquidated decades ago.  The remaining official stocks were held by a few Central Banks, such as China, Russia, and India.  These three governments were the primary source of Central Bank silver sales for the past two decades.  However, that supply has been severely depleted and will no longer supplement the market in the future as it did in the past.

Again, I look at Central Bank silver sales as a fundamental that provides information about the long-term dynamics of the overall market, not to be used for short-term price movements.

Putting Silver Market Fundamentals Into Perspective

To understand what will happen to the future silver market and price, we need to analyze the role that the fundamentals play correctly.  While most Mainstream analysts focus on supply and demand factors to determine short-term silver prices, I study them to figure out how the entire market is changing over the long-term.

As I have stated in many articles in the past, industrial silver consumption is not a fundamental that determines the silver price; instead, it reveals to me how the global economy is disintegrating.  Furthermore, Central Bank silver sales and scrap supply should not be used to forecast short-term silver price movements.  On the other hand, these two fundamentals provide data that suggests silver supply from reliable sources have been severely depleted.

Unfortunately, some of my readers are frustrated that these fundamentals haven’t pushed silver much higher prices already.  So, when I continue to write articles showing how these silver market fundamentals are changing, they criticize by saying,” those fundamentals don’t mean anything or impact the price.”  While that may be true currently, it won’t be the case in the future.

Frustrated precious metals investors need to realize the following three important key factors:

  1. The Silver Market fundamentals are pointing to a perfect storm in the future as reliable past supplies can’t be counted on in the future.
  2. Most of the physical silver investment is held in tight hands.
  3. The disintegrating Energy Industry is the most critical factor and the UNKNOWN fundamental that will impact the value of silver in the future.

Of the three key factors above, the third one (the UNKNOWN Disintegrating Energy Industry) will impact the future value of the silver the most.  However, most of the individuals in the precious metals community are still unaware of how energy will affect the silver price and market in the future.  Instead, many in the Alternative Media continue to focus the silver market in regards to the economic and financial industry.

I will be putting out some articles shortly showing just how bad the situation in the U.S. and Global Oil industry has become.  When the U.S. and Global Oil Industry really starts to disintegrate, it will destroy the value of most Stocks, Bonds and Real Estate.  Thus, the precious metals, especially silver…. will experience a price rise never witnessed before in history.


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29 Comments on "THE UNKNOWN FUNDAMENTAL: This Will Push The Silver Price Up Much Higher"

  1. DisappearingCulture | October 10, 2017 at 11:32 am |

    “Of the three key factors above, the third one (Energy Industry) will impact the future value of the silver the most.”
    You left us kinda hanging here Steve. HOW will it affect future value, and value and price in fiat currency may be different from other measures of value.
    There are hundreds of non-replaceable industrial uses of silver, so it will always be valued. It’s unique properties of destroying pathogenic organisms like bacteria, with no harm to beneficial bacteria [or the human host] makes it essential to survival in an era of failing antibiotics…or agents that can harm the host. But if it is never monetized as a currency…that is a “value limiter”.

  2. I personally think the silver price is manipulated along with gold for the benefit of some huge banks and maybe policy by the fed to defend the dollar.

    However, one could make a case that industrial demand does affect prices. from your chart the years demand rose, the price rose and years the demand fell they fell. I appears the price is very inelastic in response to demand. Only, a small amount of demand made the price go crazy and vice versa. this suggests that market is extremely tight in terms of supply. small changes are magnified by the big banks control of the market. if you plot the change in inventory and the change in price over the years in your graph you might see more correlation?

    in fact, a quick look at the cot data from 2011 shows big banks were buying at the same time the spec traders were buying. this is very unusual. thus, a big price increase. mostly the big banks skin the traders after they put on a huge position and then force margin calls. lots of spoof trading and deep, deep pockets can do wonders. It is so obvious to me. why don’t the traders see it? It must be hubris?

    I do see a correlation between oil and silver and Nixon’s action in 1971. however, if oil continues lower why will silver go up in nominal dollars. it suggests massive deflation, where everything goes down. Maybe silver doesn’t go down as much?

  3. Be nice to see Silver move up, though I’ll miss getting it on sale as I have over the last several years……still, Not holding my breath….likely more of the same ‘ole Wash, Rinse, Repeat…..

    • There is 0 reason to buy silver nowadays, that’s pure fact.
      If and when stock markets and HY credit could change this, we are not here yet. Could happen quite fast but who knows when and how…

  4. Another pro silver article which means silver will fall and paper assets along bitcoin will rise (another new “fork” the 25th october apparently, if I were them I will fork every fortnight !)…

    • you think silver price will fall soon? im lookin to back up the truck and don’t think this is the right price for that.

  5. William R Love | October 10, 2017 at 2:40 pm |

    I have bought 80oz of silver and 10 ATB 5OZ silver quarters. Hope I haven’t made a bad mistake.

    • DisappearingCulture | October 10, 2017 at 4:39 pm |

      You haven’t made a mistake.

    • No mistake. Silver is at or below the cost of mine production in most places. Cheap, even as a part of an insurance policy for your paper assets. 130 ounces is less than the cost of rebuilt transmission in a car. Hold tight.

  6. DisappearingCulture | October 10, 2017 at 4:50 pm |

    While digital/paper contracts [COMEX] control the price, the price will remain range bound.
    When that ends one sunny day something[s] will affect the price, and that will be demand exceeding ready [tight] supply. Some demand will be industrial but the demand necessary to ramp up the price would have to come from investors, as industry is getting what they need without shortages. Maybe industrial demand will ramp up in China or India if there is a concerted effort to massively increase solar panel construction.
    Sooner or later price will rise if S doesn’t hit F before then.

  7. HI Steve,
    I notice most charts begin after 2000, I’m wondering how far back your data goes tying PM’s price to petroleum.
    Do you have data previous to when Nixon did his thing, unpacking the dollar from gold?
    Be interesting doing this same study pre-Federal Reserve.
    INMO when and if petro energy is no longer driving force of our economy, economic action and reaction might revert back to pre petro energy times.

  8. Great article.I suspect there are other large stock piles of silver available to the market beyond U.S. government stock piles. I think silver shortages would become readily apparent if there weren’t. I believe silver will rise hugely in price, but the timing is unknown. We’ll just have to depend on our intellect and courage to see us through the uncertainty. Based on the previous SRSrocco articles, I believe peak oil is starting to play out right before our eyes. I also believe owning Silver is a once in a multi-generational opportunity. We will not revisit a cheap silver again. I was born in the late 60s and at that time Gold was $35.50 an ounce. I see silver performing similarly to gold just faster, and when it goes that will be the end of the world as we know it.

  9. Do you think silver falls below 14? or is there a chance for 10?

    • DisappearingCulture | October 11, 2017 at 7:44 am |


    • It doesn’t matter if the official silver price is 10 or 20 FRN’s per ounce, you should have as many ounces as you can without financial harm to yourself. The official price is too near the extraction cost to worry. Buy and take delivery. At some point, retail availability will go lacking and/or premiums will go from 1% (my last baggie of 90% dimes were ONE PENNY each over the silver content price) or 7% ($1.20 over ~$17 spot) to 30% or 200% over spot to get physical metal in your hand.

  10. Thanks Steve, regards

  11. You make a good case for a disintegrating energy industry as the primary factor in the future price of silver. But as the energy industry disintegrates, so might the global economy disintegrate and the need for energy. So I guess it depends on which disintegrates the most: energy production or the demand for energy in a collapsing global economy.

  12. The only factor that matters is central bank price manipulation; anything else is of trivial importance.

    • agreed. that might end soon, if petrodollar dies, as it is likely to due to china buying oil for gold convertible Yuan .

  13. Gordon Duncan | October 11, 2017 at 2:38 am |

    Interestingly, the Silver price for 2007 -$13.38 – stayed virtually unchanged by 2015, when the price was $15.68, if you factor in annual inflation at a mere 2% a year. The 2016 figure – $17.14 – allows for an annual compounded inflation rate of just under 2.7%. I don’t know what the true rate of inflation was over this period, but I’m prepared to bet it was higher than either of these two figures!

    • The “true rate of inflation” depends on what you buy and how much you earned during the period. If you were paying tuition out of pocket and flying commercial airlines to live in houses in Seattle and NYC, there was a bunch of price increases. “Inflation” happened the moment the money supply was increased, but prices of daily goods has not yet reflected a 4x increase in FRN’s (inside the ConUS). People in other countries have felt that kind of price pain, and worse, since 1999. In the US, we have benefited greatly from being at the center of a global financial empire, but nothing lasts forever.

  14. The unknown will be china..when the awakening happens.people will realize.Silver is Money. The Bible mentioned Gold and Silver 700 times.Man made wealth will fail.God Wealth will remain supreme!

    • The character for “money” in Chinese/Japanese/Korean/Thai is the same as for gold or silver metal. East Asians are not confused about what has lasting value.

  15. great article as always… I wasn’t aware of the oil correlation…
    but let’s be clear: what sets the silver price (since 2011?) is the paper rigging…
    I don’t even look at short term price fluctionations…
    or see anything significant changing until the coming RESET…
    when I’m hoping, perhaps naively, that a real market may be restored…
    and a new price correlation emerges: one of true value!
    justified in the supply/demand factors well described here…
    then only then will the value of my silver stack be seen… (vs junk fiat)
    stack on!

  16. Number 2 Most of the physical silver investment is held in tight hands.

    How do you know this?

  17. Bill Sodomsky | October 13, 2017 at 2:47 pm |

    Steve, as you know I’ve been following your work for a number of years now and have been a silver investor for many years before that. That said, with no malice intended, this precious metals space has become a complete fiasco. I have long ignored Peter Schiff, Jim Willie, Craig Hunter just name a few, because any talking head who cannot connect the monetary system with the energy factor is a complete and total moron in my humble opinion. The capper for me came today when I listened to Andrew Hoffman brag about the fact that he sold all of his silver to be more invested in Bitcoin! This is a guy who drew countless people into the precious metals space claiming he was one of the smartest people in the space. I’m not suggesting people can’t have a change of mind but seriously this guy had been ranting on for years about the value of silver. No more. He’s seen the light and it’s off to bigger and better things.
    It’s this kind of behavior and arrogance that permeates all media and does a great deal of damage to those of us who truly want a better and more equitable system. Eventually, many good analysts will be ignored for this reason.

  18. What oil correlation, everything follows oil. I so agree tight oil domino effect on silver prices, but when. Alternative energy demand should fan the flames when it all comes down. Still silver is in the crapper, if they cant run it to 20 again this year, that seems still bearish.

  19. There is a concept to which I have recently been introduced: That is that oil is NOT a product of fossilized prehistoric bio-matter, rather a substance produced naturally by Earth’s own energy. This was supposedly proposed by Rockefeller et. al. to justify higher prices and control the market. It also explains why oil is found at twice the depth of the deepest fossil record. IF this is more accurate and the Earth is somehow replenishing the oil supply, what does this do for your petro-based analysys?

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