SILVER MARKET OUTBREAK: Surging Physical Demand & Falling Inventories

Something has seriously changed in the silver market as traditional indicators no longer seem to matter.  Normally when the price of a commodity falls, so does demand.  However, we are seeing quite the opposite as investors continue to buy silver bullion hand over fist.

This surge in physical silver demand has put more stress on global silver inventories.  Let’s take a look at the last two COMEX Silver Inventory updates.  On Monday’s update (8/31/15), the COMEX reported a total deposit of 1 million oz (Moz) and 1.6 Moz withdrawal for a net 600,000 oz decline.  Actually, it was a net 599,207 oz withdrawal, but what’s a few ounces between banker friends.

COMEX Silver 083115

While the 600,000 oz net withdrawal was somewhat interesting, the real item to focus on was the cool 1,125,719 oz transfer of Scotia Mocatta’s Registered silver to its Eligible category.  Thus, this now puts the total COMEX Registered silver at 53.6 Moz compared to the 55.8 Moz last week.

That might not seem like a lot, but total COMEX Registered silver inventories were 70.6 Moz back in April.  That’s nearly a 25% decline of total Registered silver inventories at the COMEX in five months.  We must remember, Registered inventory means that the silver is available for delivery to those who demand bullion by being registered as such with a bullion dealer.

So, only 53.6 Moz of silver is now available for delivery.  On the other hand, Eligible silver inventories means that the silver is in a condition that conforms to the standards of delivery. Size and quality of the bar in other words. It is being stored at the Comex warehouse, but is not offered for delivery into contracts.  The majority of silver at the COMEX is stored in the Eligible category.

That being said, the Eligible inventories experienced another whopper of a decline today as nearly 2 Moz of silver were withdrawn:

COMEX Silver 090115

As we can see, there was almost a FULL HOUSE of withdrawals from the Eligible inventories.  By a FULL HOUSE, I mean a withdrawal from every warehouse.  The only warehouse that did not report a withdrawal was JP Morgan.  However, there were two large withdrawals from the CNT Depository (617,047 oz) and HSBC (1,249,735 oz) for a total of 1,948,479 oz.

Currently, total silver inventories at the COMEX now stand at 168.6 Moz, down from a peak of of 184 Moz in July.

Surging Physical Silver Demand Is The Culprit For Falling Inventories

As I mentioned in several of my interviews, this spike in physical silver investment is much different from what took place in 2008.  Why?  The Fed was just starting its massive QE policy (monetary injections) and Treasury and MBS (Mortgage-Backed Security) purchases.  After seven years of this monetary insanity, the U.S. and world financial system is in much worse shape.

Furthermore, the Fed has very little it can do when the broader stock market and economy really starts to crash.  I believe the huge surge in retail silver investment demand will not fall off like it did in 2008.  Why?  Many more investors today realize the situation may get totally out-of-hand…. so why stop buying??

This recent spike in physical silver demand started when the situation in Europe came under stress due to a possible Greek exit.  Investors starting buying Silver (and Gold) Eagles in a big way in the third week of June.  Thus, buying turned into a torrent as the U.S. Mint suspended sales on July 7th.  Sales of Silver Eagles did not resume until two weeks later.  Even with the suspension of sales, the U.S. Mint sold a whopping 5,529,000 for the month of July.

The chart below shows just how much more investors purchased Silver Eagles during June, July and August compared to last year:

Silver Eagle Sales JUN-AUG 2014 vs

From June to August 2014, a total of 6,754,000 Silver Eagles were sold.  Now, compare that to the massive 15.304,000 sold during the same period this year.  Not only did Silver Eagle purchases double, they were 126% more than last year.  Remember, when Silver Eagle sales go up, so do most of the other official coins, such as the Canadian Silver Maple Leaf.

Silver Maple Leaf sales have been so strong, some dealers are listing them as “Out of Stock” because they can’t access reliable supply and provide a specific time for delivery.  I would imagine this supply shortage situation could become much worse if we experience a continued crash in the broader stock markets over the coming weeks-months.

NOTE:  The huge increase in physical silver demand is predominantly an “Investment based phenomenon.”  While silver jewelry demand is up marginally in 2015, I would imagine industrial and silverware consumption is lower.

Gold Eagle Sales More Than Triple Compared To Last Year

If investors thought Silver Eagle sale spiked over the past three months, take a look at Gold Eagle sales:

Gold Eagle Sales JUN-AUG 2014 vs 2015

Here we can see Gold Eagle sales exploded to a total of 347,500 oz during June to August compared to 103,500 oz during the same period last year.  Again, Gold Eagle sales spiked in July due to the possible financial contagion of a Greek Exit of the European Union.

As events in Europe seem to have calmed down on the surface, the recent 1,800 point market crash in the Dow Jones sparked more fear and more Gold Eagle buying.  The majority of Gold Eagle purchases for August came at the latter part of the month.

Even though the market isn’t experiencing the kind of shortages in the retail gold market as we are seeing in the retail silver market, it may be just a matter of time.  Investors need to realize just how more dire the economic and financial system is today compared to 2008.

This next financial and economic crash will be much worse than 2008.  This is why I believe physical demand for silver and gold will only continue to increase going forward.  It may come to a time when investors don’t really care about the paper price they pay for gold or silver, but the guarantee of delivery will be their major concern.

I converse with many investors and I can tell you that some tell me they were glad to finally receive their silver in mail.  It’s stressful to have to wait 2-4 weeks or more for your silver.  What happens when things really get out of hand and the sales person tells you that they can’t guarantee a delivery time?

Again, I believe that time is coming.  I am not saying this to hype or spook investors into buying gold or silver, rather I believe it’s better to have a good holding of metal now, then wait until it becomes increasing difficult to get acquire.

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.

 CLICK HERE:   For The Silver Chart Report

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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25 Comments on "SILVER MARKET OUTBREAK: Surging Physical Demand & Falling Inventories"

  1. There is a retail shortage of some products but other dealers may have that product. I wouldn’t label the shortages as “profound” yet. I check a few times per day.

    • Just checked..the U.S. largest online retailer is pricing ASE’s at $20.06 in quantities of 20-99. That’s a hefty premium over spot

  2. Want to get a good feel for the lack of silver bullion available? Go over to JM Bullion and take a look at the “silver rounds” category. JM is a pretty big operation and what do they have left? Stuff that nobody wants like skulls and fairy rounds. And the 2 items that people want: PRESALE, i.e. BACKORDERED!

    APMEX’s offerings are a bit better. But I was on there yesterday and they can’t keep 1/10 ounce rounds in stock to save their lives! And the same thing…several items due in ad on presale as of today!

    So a recap of reality with the largest suppliers is that the most popular stuff (bullion rounds) with the cheapest premiums are getting liquidated! Where does this go? Who knows?

  3. We had minimum 10% to much output in silver.Why did the miner do not decrease the output?

    • Because they tend to have high fixed costs and debts. As the price of silver drops they are actually under pressure to mine faster, not slower. They are also under pressure to focus operations on their highest grade ore. I’m speaking of the primary silver miners.

      But you are correct that if the price of silver, gold, copper, etc. keep dropping then more mines will stop operating. The problem is that number is lower than you might at first guess because people like to look at total cost of production.

      In any event, I am bullish on silver at these prices.


      • keep in mind, too, that ‘high grading’ is a practice that often compromises the ability to later mine the lower grade ore
        I.e if it costs $20 / oz to mine the high grade stuff and $30 / oz to mine the lower grade stuff normally, the rapid excavation of the $20 / oz stock is done in a way that the $30 stock is harder to access, thus it becomes $40, $50 or $60 /oz to mine

  4. Hi Steve,

    Thank you for your good work on these articles. I have often wondered about the validity of the COMEX inventories. I think they will continue to add numbers at the last minute to save face while settling in dollars. I am guessing a more accurate indicator of a shortage in silver is just that there is very little physical left with the dealers? Also since the USA seems to be exporting most of its metal production, does this mean the miners have signed selling agreements with other entities overseas to get a higher cost? Please let me know your thoughts, thank you.


    • also, Steve: Andrew Maguire made a call a few days ago claiming that the producers are starting to ‘revolt’ (decline sales of stock to comex / lbma ) but he wasnt specific / didnt provide evidence – have you gotten any verification of this claim?

  5. Provident in TX is running very low on all 10 oz bars, has 6k maples and zero ASE. Spoke to rep today who says ” they can’t be certain when they will have new stock”. which I think from the bland response means ” better get what we got, while it’s here” . Anybody who thinks the volatility in the global stock markets is nothing to worry about, should invest all they got into apple stock while the price is down and leave the PM”s to the unlearned.

  6. Steve, I know your point very well and the producers’ cost estimates, but what would happen to supply if suddenly silver (London fix) were dropped to seven dollars? Essentially by decree, on a ‘it just happened’ basis — what would happen then to supply chain, day by day, starting from by-product producers? Thank you.

    By the way, the supply chain for Perth Mint coins is getting dry — gold coins at a major dealer are now on ‘limited stock’ basis down to 0.1oz size. I have never seen limits on those small coins. 0.25oz and 1oz are now on ‘pre-order’, and 0.5oz are also ‘limited stock’. Silver 1oz items now also either on ‘pre-order’ or ‘limited stock’, including monster boxes, which is all very much abnormal. One may argue about shortage of blanks, but that does not explain a sudden shortage of generic 1oz bars of various brands. So, it is happening right now.

  7. Get A Clue!

    Silver will not make its True Value known until the Sheople realize the STATUTORY VALUE of the “U.S. Dollar”/ “$” “, versus the ponzied fiat FRN/ IOU “market value” of Silver (or Gold for that matter)

    Those who cannot see the “self evident truth” of Silver’s currently manipulated, naked shorted paper derivative FRN “price” VALUE for Silver (or Gold) versus the STATUTORY LAW VALUE of Same, will simply be Sh*t Out of Luck when the Defecation Hits The Oscillation!

    Keep Stacking and acquiring those Silver Dimes, Quarter Dollars, Half Dollars and Dollars at these manipulated Fire Sale Prices! You will not regret it, nor will your children or grandchildren!


    S. Rex

  8. I see only one thing.All week i loose money with my minerstocks.OK at zero is finished.

    • Buying the miners is a bit like buying a call option on the metal. The bet only pays off if the metal moves higher relatively soon. If it takes five years then many of your miners expire worthless.


      • I missed the chance to sell some weeks ago.
        Like i said.They don’t chance the interest rate.They will drive the economy in a deflationary
        modus.This will not change soon.

      • Many bought mining stocks some time ago and are hoping for a value resurgence rather than selling at a loss.

        Some would seem a good investment at these prices but the counterparty risk can’t be denied.

  9. PLENTY OF INVENTORY……………!!!!!!!!!!!! SO much that SILVER CONTINUES TO PLUMMET !!!!!! I suspect it will bottom out around 9-10 bucks………..

    • Plenty of PAPER Silver…..buffoons and idiots don’t see the difference, and cannot comprehend the article.

    • TJG.

      That has to be one of the most ignorant things I’ve read in quite some time. While the world is full of PLENTY OF WORTHLESS PAPER ASSETS = $105 Trillion, there is less than 1/2 oz of available silver for every person on the earth.



      • And if more people coughed up more fiat paper or digital currency units to “invest”, they powers that be would be sure to create more “investments” with zero inherent value for them to spend it on [minus sales and account maintenance commissions]. Meanwhile there would remain less than 1/2 ounce of available silver for every person on earth.

    • TJG
      if you think that price action is a function of supply and demand – in todays twisted, corrupted ‘markets’ – then you have a long long long journey in your financial and economic education

    • When and if it hits that price there will be none available…

  10. I don’t think so.Such a deep value will be dangerous for the industry.
    This is not the interest.In addition it is possible to corner the market.

    More likely is a sidewardsrange with ups and downs.

  11. “In addition it is possible to corner the market.”

    Like the largest accumulation of silver in the history of mankind being held in [and added to] but a large banking entity?

  12. If Mexico has a financial crisis they may keep their silver which is 20 % of global mine production..

  13. Dave the Stacker | September 4, 2015 at 5:23 pm |

    (In my best “Maynard G. Crebbs” aka Bob Denver/Dobie Gillis) ……….. “That just plain spooky,man.” Burn all the paper precious metals crap, Comex and all the HFT folks and I will buy the beer and hire the band and roast a few hogs, because my silver will once again have a true definable value!

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