Physical Silver Investment Demand Great Deal Higher Than Official Estimates

Even though 2015 is estimated to be a record year for Official Silver Coin sales, total sales in this market is likely to be much higher. Why? It has to do with a portion of physical silver investment demand that is not included in the official data.

According to the Silver Institute 2015 Interim Report, total Official Silver Coin sales will reach an estimated 130 million oz (Moz), due to massive demand (June-Oct) stemming a Greek Exit contagion and the forecasted market crash in the fall. As we can see from the chart below, not only are Official Silver Coin sales for 2015 the highest ever, they are more than three times greater than they were in 2007… the year before the collapse of the U.S. Investment and Housing Market:

Global-Official-Silver-Coin-Sales-2003-2015

 

However, there is one important segment of this market that is not included in the figures above. Private silver round sales are not included in the physical silver investment figures due to the lack of available data. For new investors into the precious metal market, let me clarify the difference between Official Coins and Private Rounds.

Official Silver Coins = silver coins (mostly 1 oz) that are produced by Official Mints such as the U.S. & Royal Canadian Mints. These are labeled “coins” as they are legal tender.

Silver Rounds = silver rounds (mostly 1 oz) that are produced by several private mints such as the Sunshine and Highland Mint. These silver rounds have the same quality of silver as most Official Silver Coins, but cannot be called “coins” because they are not legal tender.

While silver rounds are not Official Coins, they still are highly sought after by investors and are easily purchased and sold back to most local and online dealers.

Sales of private rounds have increased significantly over the past several years, but their figures has not been included in the official statistics… again, due to the lack of reliable and accurate data. I have called many dealers and asked them for a general guideline of their private round sales. The private silver round figure I received from several dealers was approximately 10-15% of their Official Silver Coin sales.

After the release of the Silver Institute 2105 Silver Interim Report, I contacted the GFMS team at Thomson Reuters and asked several questions. One of the questions was in regard to the exclusion of silver round sales from their data. This was the GFMS team response:

You are correct in your observation that privately minted coins are not currently included in our silver coin demand statistics. This is something we have been working on, but it is taking time to develop back data. We have begun this work and it will be integrated into our statistics as soon as we feel they meet our reliability and accuracy standards.

I asked the GFMS team if they found that a 10-15% figure versus Official Coin sales was a good approximation. Thus, my estimate for private silver rounds was about 10+ Moz in 2015. The GFMS team responded by stating:

To give you a sense of the numbers we are currently working with, we would suggest your 10 mln estimate is conservative for 2015. 10% to 15% seems reasonable in normal years, but given the remarkable shortage of coins in North American in the third quarter and anecdotal information and data obtained from market players, we have estimated upwards of 20-40 mln ounces of privately minted coins sold in the region this year. As mentioned though, we are still working on these figures and they are by no means final.

So, according the GFMS team, they estimate that private silver round demand was 20-40 Moz in 2015. Thus, total Official Silver Coin and private round sales may actually be upwards of 30% higher than the official data.  Folks, this is a big figure… much higher than I anticipated.

Official-Silver-Coin-&-Private-Round-Sales-2015

If we assume that private silver rounds were somewhere in the middle of their 20-40 Moz estimate, that would be an additional 30 Moz of physical silver investment demand for 2015. Thus, total Official Silver Coin and private rounds would equal 160 Moz in 2015, much higher than the 130 Moz figure. Thus, the forecasted net balance deficit of 21.3 Moz for 2015 will be more like 51.3 Moz… once we add in the additional 30 Moz private silver round demand.

Furthermore, once the GFMS team adds private silver round data to their World Silver Surveys, they will have to go back and update all previous figures for the past decade. This will certainly show that the cumulative net balance deficit shown below is actually much higher:

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

Please note, the GFMS Team was nice enough to share their approximate private silver round data with me, but it is still an estimate as they have not yet acquired enough reliable and accurate data to produce these figures officially. I would imagine we will likely see private silver round sales data included in their World Silver Surveys within the next year or so.

For those precious metal investors who think “All Official Data” is manipulated…. it isn’t. I have looked at a lot of data and can tell you, the folks at GFMS use information from many Government sources. For example, the GFMS team utilizes silver production figures from the U.S. Geological Survey (USGS) and Official Coin sales from the U.S. Mint. I have checked mining company silver production data for the United States and it does correspond with the figures put out by the USGS. This is also true for the U.S. Mint.

Now, I am not saying that all the official data is 100% accurate or that some may be over or under reported, but it is a good approximation of what is taking place as it pertains to supply and demand in the silver market.

That being said, physical silver investment demand has only one way to go in the future… AND THAT IS MUCH HIGHER. I will be putting out an article next week on Gold & Silver Prices To Surge Based On Fundamentals, Not Technical Analysis. Precious metals investors who have become disillusioned or frustrated by the low paper prices and negative articles by the so-called “Anti Gold-Silver Bugs”, have no idea just how bad the current economic and financial system have become.

One of the best ways to survive the coming collapse of the Greatest Financial Ponzi Scheme in history, is to own physical precious metals.

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If you haven’t checked out THE SILVER CHART REPORT, there’s a great deal of information on the Silver Industry & Market not found in any single publication on the internet.  There is one chart in this report (Chart #19) that I can guarantee that 99.9% of precious metal investors haven’t seen before.

I use this bird’s-eye approach when I create my easy to understand charts.  The Silver Chart Report is a collection of my top silver charts from articles published over the past six years, and includes in-depth, never-before-seen charts and content that indicate that silver is on the rise. There are 48 charts in the report, broken down in five sections.

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44 Comments on "Physical Silver Investment Demand Great Deal Higher Than Official Estimates"

  1. Crazy numbers. Hard to believe guys like me are purchasing 100 – 170 million ounces of silver every year since 2010. Makes me wonder if its really guys like me, or like everything else there is a group of wealthy people that know Silver will be forced to rocket higher in the coming years and they are obtaining the real thing with gusto. If U.S. mints sold 640 million ounces of silver since 2010 and we add 15% (private mint) to stay conservative we get 736 million ounces and we multiple that by an average conservative price of $18 we get 13 billion dollars of silver sold in the U.S. That’s not including demand from the rest of the world. So where does 2% of the population get 13 Billion to purchase Silver whose price and perceived value is ever declining?

    • Good question, per my calcs that’s $2,031 per person or roughly 113 oz per person, which is not inconceivable.

      • Oh yes…assuming 2% of 320 million people.

        • To be more accurate we’d have to assume 2% of the investment public. Not 2% of the entire population. The total number of people with full time jobs in the U.S. is approximately 122 million according to Gallop survey in 2015, of that number 55% actually own stock, usually in a 401K plan which equals 55 million people. 2% of that is 1.1 million. Therefore $11,800 per person. Still your point is well made. Joe six could easily be the buyer and not a privileged secret coalition of crony investors.

          • Well, i dont think there’s an ‘old-money’ oligarch out there who isnt acutely aware that silver has yet to take out its 35 year old high of $50.

        • Assuming that only US citizens are buying silver …

    • Assuming 365 days per year, that’s like 400 – 450 thousand oz per day. = 13 tons.

  2. “…but given the remarkable shortage of coins in North American in the third quarter and anecdotal information and data obtained from market players”

    This is likely quite true. Over the past few years I have mainly been stacking silver coins from official mints.

    I did, however substitute two orders of silver rounds and one order of 5 oz bars this year when premiums got out of control. I never expected to do this, but at the time a $1.89 premium sounded a lot better than a $4.50 premium.

  3. So what about bars? The total investment demand and global too?

    • I assume bars are included under the larger heading of generic “rounds”, as most generic silver is probably one once rounds.

      Some bars are produced by government mints like the 10 ounce and 100 ounce bars from the RC Mint. But by far government mints mostly produce one ounce coins.

      • I would not make that assumption. Bars 10 oz and above are a cheaper way to stack in quantity, quickly. I rarely buy rounds and I am sure I am not alone.

        Mike “MISH” Shedlock drives this point periodically about how bars have much lower premiums and advises against rounds.

        • I agree 100%. I stack mostly bars, maybe 80%.

        • JerseyJoe,

          I would be concerned what “Mish” says about bars and rounds. Of course Official Silver Coins are more recognizable and are produced by Government mints, but I have no problem buying and owning Private Silver Rounds. All silver will be worth its weight in gold in the future.

          steve

          • Stacking ag roughly 95% in larger bars over the last 3 years. Rest was junk and a few semi-numis (e.g. from lunar series).

    • carefix,

      One of the questions I had for the GFMS Team was on their estimated “Silver Bar” demand. They reported it to be lower this year compared to last year. I thought for sure it would be higher due to several factors. I did not include Silver Bar demand because of this reason.

      I will write about this in the future.

      steve

  4. Demand will top supply again this year, PMs will rally real soon, stack ’em and stack ’em high.

  5. Hello, Folks… I’m a traveling salesman and as such I have far better than average ability to visit coin shops in many communities throughout several western (U.S.A.) states. I keep my mouth shut and my eyes and ears open, so as to gauge the tempo of the market (specifically) for silver.

    I see many transactions in which long-term holders of silver coinage are emptying their sock drawers and selling 90% silver coins to stores, and most of those transactions are right at spot, gave or take a few percent.

    I see fewer buyers of same, but those buyers tend to gobble up all that is available. So, with 90% silver coins, there is no net effect on the market. When we include the store owners, there is an equal amount bought and sold. The one point I want to make is that this market moves the product into stronger hands, those folks being less likely than the earlier owners to “have to sell” in order to pay their ongoing bills.
    On ONE particular day I witnessed a 14-year old buy buying his first half dollar, after asking me what I would recommend, and then later witnessed a couple of Amish guys buying nine, $500.00 face value bags of 90% silver coins. (It had to be nine, for some reason, all had to be exactly $500.00, and all had to be done as one deal.) I think it was paid for in advance, by bank wire.

    Regarding rounds– This category has recently been the first choice among the savvy and cost-conscious investment crowd. With the spot price of silver being very low compared to that in many recent years, the $1.50 or $2.00 premium over spot gives you more silver for your dollar of investment capital, as compared to paying about $5.00 over spot in order to buy an American or Canadian mint-produced coin. Many investors focus on maximizing the number of ounces they “stack.” Less sophisticated buyers tend to shy away from rounds, as they are told, “these are not legal tender,” and they are not “real coins.” Those words of warning are often supported by photos or actual rounds made in support of various political biases, sometimes instilling the fear in a potential buyer that no one else would buy those from him down the line.

    American Silver Eagles and Canadian Silver Maples are investments of choice for the big money, especially the big new money. I envision the cigar-smoking guys at the exclusive country club talking about how many “Eagles” they just bought. Although I do know of a couple investors who buy a monster box (500) of silver eagles on a regular basis, I am pretty sure that, percentage wise, very few silver eagles are sold to the end-investor through local coin shops. In big and wealthy communities, well yes, there are a good many sold, but in small-town and normal-town U.S.A. silver eagles and maples with high premiums are looked at with distanced eyes.

    I believe quite strongly that the percentage of Americans, and if you wish, the percentage of working Americans, that buy and hold any of the above silver investments, is perhaps one-tenth of one percent. Supportive of this theory is that store owners (dealers) confirm to me that much of their sales are to a handful of consistent buyers. This is the experience of one of my business associates who is (his) local Craigslist dealer. He advertises his inventory constantly, and sells repeatedly to just several customers.

    I conclude that the big buyers, who account for some huge percent of total American Silver Eagle and Canadian Maple Leaf sales (perhaps 50% or even 70%) are big investment funds, big family investment funds, with off-shore buyers among those groups being responsible for removing forever, steadily and on-going, massive amounts of the total production. I believe that some of the same individuals and entities that buy fine art at auction are the buyers of large quantities of these top-rung silver investments.

    • Thanks for posting this valuable perspective.

      “I see many transactions in which long-term holders of silver coinage are emptying their sock drawers and selling 90% silver coins to stores, and most of those transactions are right at spot, gave or take a few percent.”

      I saved 90% silver from coins in circulation from my newspaper delivery route in 1965 and 66…age 11-13. In late 1979 sold a couple tubes of quarters [about $20-$25 face value] and got enough dollars to pay a mechanic to rebuild a car engine. That is an anecdotal example of a store of value and buying power.

      According to a local coin & bullion dealer I know [who other than special orders for customers from a mint] buys then resells metal, many of the older holders are selling to get $ for a vacation, desire, or need. When they die he tries to buy from the estate. The sons and daughters rarely want to hold what their parents had for some nebulous future date in which they can exchange for more currency. But the hands it is going into now are strong holders. Because of higher premiums to the seller and buyers than recyclers offer not much is being melted would be my guess. But grandma’s sterling silver is being melted down. Younger people don’t want that either.

    • That’s a great summary. Thank you. I disagree that eagles and maples are for the new buyers or unsophisticated crowd. The tremendous advantage you get when buying those coins is that they are easily identified as genuine. This is because they have exact physical sizes, weights, and a hardness that cannot be replicated with any other material. The closest you can get to making a fake is to replicate the size and weight only.

      When dealing with generic rounds and bars you have no easy way to test the metal yourself for purity. Most people say, “Not a problem! Just buy from a reputable dealer.” But you will find these products very hard to sell if fakes flood the market even more than they already do. People will demand silver they can test on the spot with simple tools. And who wants the security of their silver in the hands of a promise a dealer made? The point of owning silver is to not have to rely on promises.

      Mike

      • “But you will find these products very hard to sell if fakes flood the market….”

        Because of no [evolution of] security features other than size and weight, and because it is the most popular one ounce coin, the ASE has been counterfeited and will be again when the fiat valuation increases in the future. It may be in the future that the Silver Maple becomes the most quickly sale-able coin because they have incorporated anti-counterfeit minting marks.

        • You missed the point entirely. Fakes are a fact of life. The point is that an ASE fake is easily identified. If someone handed you one you would recognize it immediately just by dropping it on the counter. The Canadian mint’s anti counterfeit measures are nice but they are not nearly as useful as simply testing the coin for size, weight, and hardness.

          You can’t do this with a generic round or bar unless you are certain you also hold exact copies of these that are real.

          Mike

  6. silverfreaky | December 5, 2015 at 2:57 am |

    http://www.gold.de/preisvergleich,170,Aztekenkalender.html

    I like this coin.I have the Version from 2010.Very expensive now.I believe that you can buy a small car in the near future with this coin.
    Limited to 1500 pieces.The first one only 300.

  7. Thanks Steve, good article!

    In a SHTF environment I question the bartering ability of silver rounds….as people will not be familiar with many of these rounds, and there are thousands of examples over the decades.

    I know hundreds of examples of .999 Silver rounds, so many in fact that I think I would be apprehensive in accepting an unknown silver round for bartering.

    I can appreciate the lower -price over spot, but I think I would prefer a coin that would be recognized by most people today and that’s the 90% Silver. It’s funny how many people do not even know what the Silver Eagle even looks like because it’s NOT Circulated…..

    I sometimes take a single eagle and show friends & family what the REAL American Dollar looks like. Most people I show have no idea…..

    The American People have forgotten what REAL money is. They will soon WAKE-UP.

    • James Runavich | December 5, 2015 at 1:52 pm |

      This is why I diversify.

      I buy 40% Junk Silver, 10% 1 oz Eagles, 50% Silver Rounds.

      I put 20% of my PM money into 1oz Krugerrands & Gold Eagles.

  8. OutLookingIn | December 5, 2015 at 8:36 am |

    The “Big Accumulator” of physical silver over these past 4 years has, and is JP Morgan.

    Their physical silver off take from the COMEX during this time has been quite sizeable.

    As has been their conversion of shares to physical in the SLV ETF and taking delivery.

    They seem to be vacuuming up physical supply where ever they can find it. So much so, that now their vaults are stuffed and still they seek to add to their hoard. These are ‘insiders’ with an ‘inside’ track. They must “see something” in the not-to-distant future, as concerns price movement versus available supply, which I suspect will dry up when the price movement occurs.

    • lastmanstanding | December 5, 2015 at 5:17 pm |

      OLI, well said…anyone who for one minute that thinks the “Big Accumulator(s)” are NOT vacuuming up Au/Ag with the billions of dollars printed out of thin air that they get for nothing is a fool.

      They know exactly what is coming because they have controlled it since 1913…and even before.

      The same bastards that were thrown the hell out in the Revolutionary War have never given up trying to return…they are back. In fact, they never left.

      A day is coming, will they stay or will they go…to be continued…

  9. If private “rounds” are not calculated in GFMS figures, what about private “bars” that are manufactured by these same private mints (such as 1 oz, 10 oz and 100 oz)? Is this another source of physical silver that is not showing up in current calculations? If so, the deficit is even larger…

  10. OutLookingIn… Somebody wrote those words. And several folks have repeated them. The ideas are plausible. But… How do you know? If anyone knew, and could prove it, he would show that proof online, and then that proof would repeatedly show up. But we don’t see it. I’d like to see it. That proof would sure be a “tell” that would give silver holders a reason to nod their heads and say, “Yep, I am right.” Until there is proof, it’s just speculation.
    ————————————————
    Steve, where does the name SRSrocco come from? Steven “Rocco” St James?

  11. Ken, I absolutely agree with you regarding the recognition factor of 90% silver coins. When those coins are available at or very near to spot price, I see customers at coin shops buying them rather than rounds. I think those buyers are smart.

    I saw a huge disconnect occurring during several months recently in which the premium on 90% coinage became huge, and the premium on rounds stayed well below that. I couldn’t figure out why dealers kept their selling prices on 90% at a very high market level, but kept their buying price at spot. Investors could not easily reap the benefit of the high market price by selling at a huge price, as there were few or no actual buyers at those prices. Afterward I realized that the answer was simple — the dealers knew the premium was artificial and would eventually drop to near zero, and did not want to be holding overpriced coinage. Plus, because there were few or no actual buyers at the higher price, dealers weren’t encouraged by the profit motive to try to build their inventory of 90%. The small amount that was tendered to them at the low prices kept them sufficiently stocked.

    Now that the premium on 90% silver has dropped, and seems to continue dropping, the switch to them and away from rounds occurs in earnest.

    If what you want to invest in is rounds, I want to emphasize that you’ll have an easier time selling well-known brands and styles to dealers. It makes sense that dealers would be more interested in buying rounds that they can most easily sell. If what you’ve accumulated over the years is a mishmash of rounds designs, I suggest that it would be prudent to trade your way toward more recognizable varieties, just because if you NEED to sell quickly, you’ll have an easier time while getting the best price, if the buying dealer foresees an easier flip for himself. On the other hand, if the way you want to purge your holdings is on ebay or Craigslist, you may find it easy to sell a group of ten different rounds. The Craigslist seller that I wrote of earlier says he has a tough time selling rounds. I think it’s specifically because of the suspicion-and-unsureness factor.

    While I’m at it, let me add that I recommend against buying / selling any silver face to face, such as on Craigslist, as that opens the door to a whole host of problems such as personal security. Dealers are set up to do that business, and I acknowledge that they deserve profit for the value they provide.

    Charley Z

    • Exactly. Do not underestimate the power that counterfeits can have on a market. You want only silver that you can identify as genuine. Maples and Eagles offer that. Rounds and bars do not. If you are handed a maple of proper size and weight that has a core of other metals it will become immediately obvious to you.

      Mike

      • Silvrwillwin | December 6, 2015 at 6:34 am |

        What helps to make the 2015 Maple oz popular is the small formed maple leaf on the face of the coin. It helps to alleviate counterfeiting.

        • And why is the US mint so far behind on this (like they were on the $100 etc)?

          BTW as much as ASE are widely recognizable – many counterfeits have been found. So yes…why not make them hard to fake?

          • They will always be widely counterfeited. But you can identify the fakes very easily. Not a single one of the counterfeits matches the size, weight, AND hardness. They must vary in one or more of those categories if they are fake. Comparing to the real thing then becomes trivial since you will have samples of real coin to compare to.

            If someone hands you a generic bar or round and you don’t have a genuine copy to compare to, then you must use far more complex methods to identify it as real.

            Mike

  12. it is hard to estimate how much buy high sell low recycles have inflated actual accumulated sales since 2012.

    i personally was forced to dumped 2000 ounces in china.

    if we put 20% recycled investment demand, the total accumulated demand is 20%.

    nobody has estimate this recycle number.

  13. correction:

    if we put 20% recycled investment demand, the total accumulated demand is 20% less.

  14. i’d say that forced sell low liquidation helped to supply the physical demand after 2012.

    and don’t forget these silver coins are sold to the entire globe, not just within US.

  15. dealers in this biz are not here for the cause, they are here to make a profit too.

    so dealers like sdbullion could be trying to fleece the buyers too.

    the more concentrated dealers become, the more likely they coordinated the premiums in order to fleece the buyers no matter where the paper prize is.

    this is a probable cause for high premium when paper price is low.

    i don’t blame them. they are in the biz to make a profit.

  16. James Runavich | December 6, 2015 at 2:54 pm |

    So thinking outside of TEOTWAWKI does it not make sense that any form of silver will be sellable back to coin stores that have the means and knowledge to spot counterfeits?

    Obviously in a grid down street barter will be much trickier with generic rounds and bars.

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