OFFICIAL SOURCE: Global Silver Supply Deficit Surges On Revised Data

If the cumulative global silver deficit since 2004 of one billion ounces wasn’t large enough, a data revision published by the Silver Institute shows the actual figure was much higher.  How much higher?  A great deal when the additional revised amount would totally wipe out all the silver at the Comex and Shanghai Futures Exchange warehouses.

The Silver Institute receives its figures from the GFMS Team at Thomson Reuters.  The GFMS Team also puts out the World Silver Surveys.  Some of the data from the World Silver Surveys are published on the Silver Institute website.

Before I get into the details of this deficit revision, I want to discuss the notion put forth by many precious metals investors that “NONE” of the information from the Silver Institute should be trusted.  These folks claim that “ALL” the data is manipulated.

While I agree that this data is being researched, quantified and published by Thomson Reuters, one of the largest data-news organizations in the world, there is a lot of good information in these World Silver Surveys.  Matter-a-fact, much of the silver mine supply data is taken from government sources such as the USGS in the United States.

Of course, some precious metals investors will say this government mining data shouldn’t be trusted either.  Well, if that is true, then the person we are married to or in a relationship with may actually be an alien from some foreign planet.  The conspiracy mantra can go to absurd levels.  While I believe conspiracies do indeed take place, not everything is manipulated or a conspiracy.

For example, government mining data is pretty accurate because it’s done by bureaucrats who are just doing their job.  Furthermore, we can check silver mine supply which is reported by private and public companies and then match it up with the government data.  For the most part, this jives nicely.

Of course there are still some precious metals investors who believe all the public and private mining data is manipulated.  They may believe that the companies are either under-reporting production or there are a bunch of hidden out-of-the-way mines that are not included in the data.  Sure, there could be some mines that are missed or excluded on purpose, but this would be a small amount.  We must remember, there are State and Federal taxes that are collected from these mines.  Neither the State nor the Federal Govt will forgo receiving taxes just to keep a mine hidden (for the most part).

Lastly, if we look at the trend of all metals production since 1900, they have all gone up exponentially in the same fashion and to the same degree.  Regardless, the World Silver Survey is the best information source we can go by, much better than the CPM Group’s Silver Yearbook… in my opinion.

The Cumulative Global Silver Deficit Surges On Revised Data

When the Silver Institute first published their global silver supply and demand table for 2014 in May 2015, it showed a net balance surplus for 2014 (in green):

Silver-Institute-2014-Supply-Demand

According to the GFMS Team, the world suffered net annual silver deficits from 2005 to 2013.  However, this became a small surplus of 2.6 Moz in 2014.  Again, this was published back in May of 2015.  When they provided their Nov. 2015 Silver Interim Report, they revised their figures to show a 27.5 Moz net deficit for 2014 and a 21.3 Moz deficit for 2015:

Silver-Institute-NOV-2015-Interim-Report-Supply-Demand

So, now the GFMS Team shows continued annual net silver deficits since 2006.  The net deficits did occur in 2004 and 2005, however they were not included in this table.  I took the data from this chart as well as the figures for 2004 and 2005 and made my own chart below:

Global-Annual-Silver-Net-Balance-2004-2015-Forecast

Going by this forecast for 2015, including new data for 2014, the world suffered a cumulative 1,021 Moz net silver supply deficit since 2004.  These figures represent changes in Exchanges & ETF’s.  The Physical Surplus or Deficit figure shown two lines above the Net Balance figure in the GFMS data tables do not include inventory changes in the Exchanges (Comex & Shanghai Futures Exchange) or the many Electronically Traded Funds (ETF’s).  Thus, this net balance figure is the most accurate.

That being said, let’s get to the large global silver supply deficit revision.  I mentioned in previous articles, that I had an email exchange with the GFMS Team on the subject of “Private Silver Bars & Rounds” not being included in their figures.  They responded by letting me know they were working on including private rounds and bars, but I thought it wouldn’t be for a few years.  However, they included private silver rounds and bars in their 2016 World Silver Survey.

Not only did the inclusion of private silver bars and rounds change the figure for 2015, it revised it higher for many years.  Which means, physical demand was even higher causing higher deficits.  Here is the Silver Institute’s newest 2015 Supply and Demand Table:

Silver-Institute-2015-Supply-Demand

Taking this new revised data and updating my chart, the cumulative global silver net deficit increased 263 Moz to 1,284 Moz, or nearly 1.3 billion oz:

Global-Annual-Silver-Net-Balance-2004-2015-Revised

According to their Silver Bar & Coin revisions, about half of the total demand increase came from this segment of the silver market.  The GFMS Team also revised Jewelry and Industrial demand higher for certain years.  So, half of that 263 Moz net silver deficit increase came in the past few years and most of that figure came from adding Private Bars & Rounds to the data.

NOTE:  there are 153 Moz of silver stored at the Comex and 63 Moz at the Shanghai Futures Exchange for a total of 216 Moz.  Thus, the GFMS data revision of an additional 283 Moz net balance deficit would totally wipe out all inventory at the Comex and Shanghai Futures Exchange.

Okay, the question going through many readers minds right now is… “Where are they getting all that silver?”  My simple answer is, “I don’t really know.”  However, it’s likely coming from stockpiles gained during surplus years in the 1980’s and 1990’s.  Most of this surplus during the past decades came from old official silver coinage that was too valuable to be used in a fiat monetary system.

It is impossible to know how much of this “Unreported Above-Ground” silver stocks have been depleted and how much remain.  Regardless, at some point these remaining silver stocks will be totally overrun.  I tried to explain this in my last article, The Foundation Of The Financial Markets Took A Big Hit In 2015, but very few people read it.  Unfortunately, most of the sites that refer my work, only do so if I stick to writing about the precious metals.

This is very unfortunate as the energy data is even more important than the precious metals information.  I was contemplating adding that article to the bottom of this one so more readers would look at it, but I decided instead just to republish one chart:

World-Oil-Discoveries-vs-Consumption-2015-NEW

This chart shows that the world spent a lot of capital in 2015 to find 2.8 billion barrels of new oil.  Unfortunately, the world consumed 10 times more than that amount at 29 billion barrels.  This is extremely bad news for those who believe business as usual will continue forever.

Furthermore, some readers of my work can’t CONNECT THE DOTS.  I see this from reading some of their comments of my work on various websites.  They say, “If the price of oil does not rise due to future shortages, then why would the price of silver go to $100+?”  They are trying point out inconsistencies in my work.

LET ME REPEAT MYSELF on this issue.  While I have written in length and made many charts showing the oil-silver price connection in the past, it will be IRRELEVANT in the future.  Why?  Because of the collapse in value of most paper assets.  Paper assets need a growing energy supply to give them value.  Falling oil supply will destroy the value of most paper assets (and physical ones including Real Estate).

Which means…. investors will flood into silver and gold to protect what wealth they can from the collapse of paper assets.  So, yes… the price of silver can rise to $100 or more even if the price of oil remains low.  The price of silver will be based on its HIGH-QUALITY STORE OF VALUE rather than its current COMMODITY-PRICED mechanism.

If more of my followers would read my energy articles, they would realize this.  However, the BLINDFOLDS stay on as they continue to just be interested in one aspect of the precious metals market.  This is PURE FOLLY.

Lastly, if you haven’t checked out our new PRECIOUS METALS INVESTING page, I highly recommend you do.

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32 Comments on "OFFICIAL SOURCE: Global Silver Supply Deficit Surges On Revised Data"

  1. Steve,

    “While I have written in length and made many charts showing the oil-silver price connection in the past, it will be IRRELEVANT in the future. Why? Because of the collapse in value of most paper assets. ”

    Fiat currencies are big among those paper assets and, while there may be a period of time when the vast oil surpluses remain relatively low priced, there is an inherent energy value relationship between gold, silver and oil.

    When gold goes to $10,000 per ounce and silver prices go to $1,000 per ounce, oil won’t be far behind. It is for this reason that I believe the next credit crash will be unlike all of the others. The cost of energy will make a quick recovery impossible and will result in a total realignment of supply chains from global to local.

    SteveW

    • Sorry for the typo – Silver at $100 per ounce.

      • No way the GSR is 100 when gold is at $10k per ounce. More likely to be 10 than 100.

        • You are probably right but that makes the argument even stronger. If silver is $1,000 per ounce, do you thing the Saudis or anyone else is going to take less than $2,000 – $3,000 US dollars for a barrel of oil? What does that make the cost of a gallon of gas? $250 – $300?

          Could get real ugly.

          SteveW

          • I would say this: The difference between precious metals and all other commodities is like comparing apples to oranges. Precious metals are way under-valued., oil is not.

            I do not believe that oil will behave exactly the same way as silver and gold. It will behave similarly, but the magnitude will not be so marked.

            The world can tolerate virtually any high price for silver and gold because both industrial and investment demand is INELASTIC. People don’t need silver and gold on a day to day basis, like oil. Also, when people stampede out of paper investments and into precious metals, it won’t matter how high the price is, they will still buy. Weather they can buy one oz. or one-tenth of an oz., they will still buy. Because that tenth of an oz. still represents a certain dollar amount.

            However, the demand for oil and other commodities is much more ELASTIC. There will be virtually no customers for oil if it goes sky high. Oil can often be substituted. The vast majority of consumers will be priced out of the market and that will cure the high prices for the most part.

          • I’ve been working as an Engineer in the oil sector in the GOM for 13 years. (longer than some, not as long as others) and as soon as oil climbs to a nice profitable 70.00/bbl the oil exploration sector will explode again. Currently, many of our support vessels are stacked due to the dismal 30-40.00 oil.
            Once oil reaches 100.00/bbl, there will be so many drilling rigs opening up wells it will make your head spin.
            FYI – at 100.00/bbl my wages were 25% higher than industry standard.
            1,000 oil will never happen, because there are insane wells in the Arctic that are waiting to be tapped. US/UK/Finland/RUSSIA have all staked out their national borders up there just waiting for more ice melt.

    • Two Words that will very soon describe physical silver: Too Late.

  2. The result of reading this article is confusion. The points are good and clear, the question I wanted to ask is mentioned in the article — that integral deficit in a big number of ounces does not really relay the gravity of the question: that is nearly 40’000 tons of silver. Just to put in to scale, one standard container is 35 tons, so this quantity is 1141 containers — literally a shipload of silver. I wonder who would have that much, but it is hardly the miners — they are keen to hold back gold sometimes, but not silver (to my knowledge).

    The most confusing part it the oil chart. How long does a typical well run? About twenty years, give or take 50%? I have seen Russian official data on oil reserves — in short, they expect to peak in this decade, and focused on sustaining production if possible, but a decline is also possible. To put it to scale, it is about as much oil output as Saudi, within a realistic rounding error. So, in a world that is visibly, tangibly running out of exported oil (not to be mistaken with total oil), how will the pricing of commodities function at all? What will become obvious is not the need for preservation of capital in PMs or what not, but the need for survival and evacuation from oil importing countries, except China that made a sweetheart deal with Russia to secure supply for decades ahead. Europe will be the first on the chopping block, as their imports compete with Chinese imports, and Russia will accomodate China first, and EU probably last, for geopolitical reasons. So, there will be a “Titanic” situation, with one part of the ship afloat and fine, and another going down in agony. How can one price an internationally-arbitraged items such as PMs in that enviroment? Will there even be a price as we know it today?

    • Reader, take a look at this, especially the comments from Ron Patterson about the depletion rate of giant oil fields:

      http://peakoilbarrel.com/north-dakota-declining-slowely/

      The depletion rate of giant oil fields, fields that provide about 50% of world oil, is between 6 and 12%, and it started more than 10 years ago. It’s rather alarming. Looking at Steves chart of new oil discoveries, there’s only one conclusion for me; all paper will vanish as soon as it is very clear to everyone that cheap oil is finite.

      You don’t have to wait until 2025 for that to happen.

      • By Ron Patterson:

        Dennis, that 8% decline rate was Saudi ARAMCO’s estimate. I know they lie a lot but it is just not like them to lie on the pessimistic side. But when they said they had gotten the decline rate down to almost 2% with infill drilling, now that might have been a lie.

        At any rate that “almost 2%” was 10 years ago. There is no way it is still “almost 2%” today.

        Oh, one more thing. That 8% was just an average. What they actually said was their fields had a natural decline rate of from 5 to 12%. That would average out to be 8.5% but they rounded it off on the optimistic side.

        Also that 5 to 12% was also 10 years ago. With massive infill drilling keeping production high but depletion higher as well, there is no way it is still 5 to 12% today.

        But I do understand, you disagree with ARAMCO’s estimate. You think ARAMCO is either lying or totally incompetent. Okay Dennis, I know where you are coming from.

        Edit: The decline of the world’s major oil fields

        Aging giant fields produce more than half of global oil supply and are already declining as group, Cobb writes. Research suggests that their annual production decline rates are likely to accelerate.
        By Kurt Cobb, Guest blogger APRIL 12, 2013

        Snip.
        5. Now, here’s the key insight from the study. An evaluation of giant fields by date of peak shows that new technologies applied to those fields has kept their production higher for longer only to lead to more rapid declines later. As the world’s giant fields continue to age and more start to decline, we can therefore expect the annual decline in their rate of production to worsen. Land-based and offshore giants that went into decline in the last decade showed annual production declines on average above 10 percent.

        What Cobb is saying is that while technologies keep the decline rate low early, it can only increase the decline rate later. Hell, that is just common sense. But then common sense don’t count for much these days.

        Dennis, you would not believe 8%. Would you believe 10%?

  3. Steve,

    I love your articles, especially your energy articles.

    What I have passed along to friends is that; when you buy gold or silver, you are purchasing the energy, oil, and the labor going into to mining the metal.

    At the moment those costs are less expensive than they will be in the future.

    Keep up the great informative work!

  4. Joe Lindell | May 16, 2016 at 7:38 am |

    I need some help!. All these articles regarding FIAT currency collapsing seem absurd. If the US dollar collapses what do 350 million people in the USA do they very next day? They’ll riot! Supply chains
    will stop? My answer: The FED will start printing more money to keep up with the debt? The dollar will simply devaluate. It has happened world wide in Mexico, England, Venezuela, Greece, Italy, Japan and on and on. It is at this point silver becomes a safe haven instead of dollars or treasuries. It is easier to retire a $1000 treasury note with dollars in the future worth only a third of what they were worth when the bond was first purchased. Inflation retires debt. A 30 year mortgage was tough in the first few years but very easy to pay off in the last 15 years. This has been going on for years only at a more modest %. Will someone describe in plain English what is meant by a collapse of the FIAT currency as written in all these articles? ? I am a stacker and convinced that precious metals are the
    safe haven.

    • “Will someone describe in plain English what is meant by a collapse of the FIAT currency as written in all these articles? ?”

      To me [and this is just one interpretation] collapse of the fiat currency means increasingly rapid decrease in the buying power of a given quantity of currency. Or outright refusal of someone [individual, company, or country] to accept a fiat currency for it’s goods or services.

      • You are both essentially correct. The collapse of a fiat currency is not a singular event but rather a process through which the market loses faith in the currency. The value of fiat currencies is backed only by the faith the market participants have in the strength of it’s issuer.

        When the market starts to lose faith in the currency it starts to lose value and goods priced in that currency rise. It is a self reinforcing process. As prices rise and the currency’s value diminishes, it’s issuer prints larger and larger denominations (hyperinflation) until it’s only value is its use as toilet paper or fire starter.

        The collapse of the US dollar will be a little more complicated due to the fact the it is currently the world’s reserve currency. As the global deflationary cycle deepens, the other world currencies will be devalued. This will cause the flow of “money” into the US markets which are viewed as “a safe haven” which, in turn, will increase the value of the dollar.

        At some point in this process there will be a credit crises. Who knows what will cause it but when it happens, every one will want cash but the US government has created so many digital dollars that there is simply not enough cash in existence. All those paper assets will suddenly be worth nothing. The price of gold, silver, oil and many other physical assets will skyrocket in price. For a short period of time cash in US Dollars will be used, hoarded and accepted. The US government response will be to actually turn on the printing presses and print dollars as fast as they can. This will cause hyperinflation (in dollars) with the result that the dollar will be good for TP and starting fires. The final fiat currency collapse.

        At that point or when the credit crises hits, maybe they will reintroduce a precious metals backed currency in an attempt to save world markets. The problem will be that it is too late. The cost of physical assets, most important of which is oil, will be too costly to allow for quick and complete recovery. Local, rural markets will recover the quickest, regional markets much more slowly and global markets will be gone for a long time.

        Best to be prepared.

        SteveW

    • They will not riot my dear, they will just work even more like their comrades in arms ie asian slaves!

    • Another demonstration of only very short term effect from their causation.

      • From strongly in the green near a major turning point/resistance to a red claose, I see complete control at the right time and the right place…

        • We don’t know if the COT figures are even real; only the inner circle banker’s know. We know the attacks are real. We know they aren’t working as well as they used to.

          “Gold’s path looks like Niagra Falls in the graph above because shortly after the Comex opened this morning because “someone” decided to dump over 55,000 contracts onto the Comex. 55k contracts translates into 5.5 million ounce of theoretical gold.

          “Theoretical” because it’s only in theory that the Comex has 5.5 million ounces of gold to deliver. Currently the Comex is reporting a little over 697k ounces that are available to be delivered into the paper gold contracts that the banks print up and dump on the market. The Comex vaults are showing a little over 7 million ounces in total in the vaults. This is highly theoretical because most of the gold is accounted for the big bullion banks. I use “accounted for” loosely because there is no mechanism in place to hold the banks accountable for what they are reporting.

          In other words, the amount of “physical” gold reported by the Comex is likely nothing more than a “suggestion.”

          They slow the train down; keep it from reaching full speed, but it has left the station of the “deep state’s” control.

          • The COTs or physical gold stocks at the comex are meaningless in my opinion.
            If they decide that 1300 is an important frontier, they will sell one , 10 or 100 billions if required.
            I repeat one more time, only a deep pocket state can fight the comex (playing with one’s else money) or put back gold into banking/monetary system which could blow the western gold cartel. In the meantine, the comex is in FULL control and with not a single sign of panic from their control rooms.
            Congratulations to comex : running such system with so high leverage, a…fucking billions of asian people and non western central banks, creating a commodities exchange with no deliveries and making some FU on a daily basis all the way to the banks with daily attacks up to 4 times a day (commercials always win), that’s high level capitalism (yeah it is that capitalism, not BS from bill hotler from his childhood which never happened this way).
            The only thing which decreases a little big their genius is they have in front of them only a bunch of eunuchs (China, Russia and especially india who are invaded by britain apparentlt).

          • I have been trading the COT for years. They have been right 99 per cent of the time. This year has been different as silver is rising against the biggest commercial short in history.

  5. The problem is one of perspective. With a dollar centric perspective you are undoubtedly right. The point you are missing is that when gold is $10,000 per ounce, the dollar will not be worth what it is today. All the wage earners that are left and all the fixed income people will not experience a massive increase in income but rather a meteoric decrease in purchasing power. We WILL very likely see $1,000 per barrel oil but there will be very few that can afford to buy it. Without the demand the supply will not increase but decrease.

    All of the Arctic neighbors may well be salivating at the prospect of all that deep oil but the market won’t be there. $1,000 oil will be $1,000 because the dollar will be in the toilet and only the uber rich will be driving cars.

    SteveW

    • Yippee ki-yay | May 16, 2016 at 1:29 pm |

      Hi SteveW,

      I think your high-level summary for Joe Lindell on the causation and what a currency collapse would like is as good as any.

      I believe the fall of the Weimar Republic is a good historical example, but society and information has advanced dramatically since then. In addition, I think it is impossible to predict how governments, and people, will respond to such a crisis, since we are definitely in uncharted territory.

      Although what I constantly struggle with, and would question in this discussion in general, is the excessive focus on oil. Before oil, everything was coal.

      If oil was really pushed to $1,000/barrel, the uber rich, governments, academia, and businesses would find profitable alternatives to oil. Economics, even in manipulated markets, economics has always proven this. If oil becomes too expensive to extract and refine, innovation will lead to alternatives.

      I’m not talking about the situation today, where shale threatens the world’s oil dependency, so oil-producing countries flood the market to crush this industry, and protect market share and oil dependency. These are short-term games given their reserves, but in the long term, when there are no reserves.

      When a viable alternative to oil exists, or technology allows us to do much more with much less, the price of oil will become very inexpensive. It’s just my opinion, and I may be completely wrong, or I may not completely understand the EROI theories.

      Oil aside, a debt crisis alone creates a necessity for precious metals, and a precious metal backed currency, in order to prevent governments to print more than they can actually back.

      • Yippee ki-yay,

        The reason for the focus on oil is that our whole world is made of and runs on it. There is nothing that comes even close to the cost efficiency of oil and all of its by-products. And, unfortunately, this “magic” thinking that technology and innovation will come to the rescue is simply just not true. There is really only one effective alternative power source – hydro power generation and it is strictly a luck of the draw location application. You still have to build the generators and without oil I am not sure about the cost effectiveness. All other “alternative energy” sources are just not cost effective. It costs more to build and operate the equipment than the value of the energy you ever get out of them. EROI just isn’t there.

        When the price of oil reaches a certain relatively high cost, coal will make a big comeback. There are a couple of coal conversion processes that were developed in Germany in the 1920’s and 30’s that convert coal to gasoline, diesel, avgas and all of the other distillates but the costs are currently prohibitive. When oil gets expensive enough these will then be market feasible but still very expensive.

        The reason the majority of the developed world has been moving away from coal is that most coal is very dirty and is not very efficient — that is why the developed world primarily relies on oil.

        According the the USGS in 1975 the US had about 4 trillion short tons of coal and the US has 23% of the worlds coal. So we are not running out of fossil fuels, we are merely running out of AFFORDABLE fossil fuels for the masses.

        As for precious metals, it is cheap diesel fuel that powers the generators and mining equipment needed to extract them.

        The Tennessee Valley Authority is about to install it first modular nuclear power plant. It remains to be seen if this may be the magic bullet that can save us from peak oil. It cannot save us from the catastrophic credit/currency collapse that is coming.

        SteveW

  6. It takes OIL in the form of Diesel to run the machines that dig/sort ore. The reverse is not true. Oil doesn’t care about silver/gold much. Oil cares about Oil, a lot.

    If I could store a lifetime of petroleum products instead of silver/gold/pgm’s, I would. Oil is cheap now, but my home heating oil tank is only 600 gallons. That’s just one ounce of gold to go from almost empty to full. Cheap!

    Even if we had some kind of magic energy source putting out MWatts right now, we would still need Diesel for transport. From your VW TDI to fire truck, or big construction machines, or backup gensets at lightwater nuke power plants, Diesel is the real fuel of civilization. We will reform carbon sources and make alt-fuel and ersatz-Diesel with the electricity from the magic energy source, as soon as possible (Thorium-Plutonium liquid salt reactor feeding waste heat to a Fischer-Tropsch SASOL-licensed synfuel plant? ). Soon happens some time after we get started, and not earlier.

    You can get silver/gold without Diesel. Slaves.

    Cheers.
    pdxr13

  7. Evidence is overwhelming the COMEX is slowly losing control this year. They still have some control; they are just beginning to lose it.

    Anyone who hasn’t recognized the change from the past is just ignorant.

    Anyone who says they are in complete control with no sense of [choose the word you like best…fear, urgency, concern, trepidation, desperation] hasn’t recognized the change…or is just a shill [consciously of unconsciously] or a troll.

    • We will know if something had changed when the commercials short position will have been reduced while gold/silver would not have crashed in the meantine.
      Up to know, I would say the song remains the same…

  8. silverfreaky | May 17, 2016 at 5:06 am |

    That’s right.The commercials make the trend.
    But the HUI-Trend looks not that bad.

  9. We know the commercial’s short positions matters less this year by the decreasing lack of leverage per contract volume it it has has on the spot prices…and how quickly they rebound after a hit. I’m pretty sure TPTB didn’t want over $17 silver or over $1,250 gold.

    When one goes back to the basics of the situation [rather elementary for many posting on this site], one can see the reasons why. This is one article of many that could be written, geared more for for the general public. In time fundamentals do matter, and the COMEX can default. The form that default takes can’t be known, but default is the path they are on.
    http://dailyreckoning.com/geologists-case-gold/

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