SILVER OUTBREAK: Investment Demand Will Totally Overwhelm The Market

It’s no secret to the precious metal community that silver is one of the most undervalued assets in the market, however 99% of Mainstream investors are still in the dark.  This was done on purpose to keep the majority of individuals invested in Wall Street’s Greatest Financial Ponzi Scheme in history.

You see, this is the classic PUMP & DUMP strategy.  Unfortunately, it’s not a lousy penny stock that Wall Street is pumping, rather it’s the entire market.  Most pump & dump stock campaigns last a day, week or a few months.  Sadly, this one has gone on for decades and the outcome will be disastrous for the typical American.

The problem is quite simple… there are way too many PAPER ASSETS floating around backed by very little PHYSICAL ASSETS.  Or, let me put it another way.  There are way too many DEBTS in the market masquerading as assets, while very few investors hold true STORES OF WEALTH.

And one of the best stores of wealth in the market is SILVER.  Yes, gold is also another excellent store of wealth, but silver will outperform gold spectacularly when the Mainstream investor finally gets precious metal religion.

I was inspired to write this article due to a recent announcement by one of the well known silver analysts in the Mainstream and alternative media.  Jeff Christian of the CPM Group made this statement which was reported in a recent Bloomberg article, Why Poor Man’s Gold May About To Get More Investor Love:

Not everyone is convinced.

“There’s a lot of bullishness forming around silver,” said Jeffrey Christian, managing director at New York-based CPM Group, a precious metals adviser. “We are of mixed minds. Silver is in surplus, plain and simple.”

Investors will only increase their purchases if there are more worrying economic, financial and political developments, Christian said in an e-mail dated March 3. CPM Group data on supply and demand show annual surpluses from 34 million ounces to 177 million ounces stretching back to 2006.

As many of you know, Jeff Christian’s CPM Group publishes the Silver Yearbook.  According to their figures, the global silver market has enjoyed annual surpluses since 2006.  Several of my readers forwarded this statement to me and asked me what I thought of it.

Here is the CPM Group’s chart showing annual silver surpluses since 2006:

CPM-Group-Silver-Inventory-Chart

Well, there you have it… the silver market did enjoy annual surpluses since 2006.  Or did it??  If you were from the Mainstream media and you only read the CPM Group’s Silver Yearbook you would have been bamboozled by the data in this chart.  Why?  Because Jeff Christian’s CPM group cleverly OMITS silver investment demand from this calculation… LOL.

Here is part of the CPM Group’s Silver Demand table showing how they arrive at their supposed surplus:

CPM-Group-Silver-Demand-2015

On the top is total supply, then they subtract out Photography, Jewelry & Silverware, Electronics & Batteries, Solar Panels and Other Uses to arrive at their surplus figure highlighted in green.  They take that figure to make the annual silver surplus chart above it.

Then they QUIETLY subtract Official Silver Coin demand below it and make adjustments for changes in inventory.  The figure highlighted on the bottom is the real annual net silver market balance.  If we go by the CPM Group’s figures here, they actually show a deficit for 2013 and 2014.  How Mr. Christian can call this a surplus is beyond me.

You see, the CPM Group’s Investment calculation is titled as an “Addenda”.  Why an addenda???  And where is Silver Investment Bar demand?  I hate to say it, but CPM Group’s Supply & Demand figures receive a POOR GRADE compared to the data put out by the GFMS Team at Thomson Reuters who publish the World Silver Surveys.

According to the Silver Institute news release on the Silver Interim Report, the GFMS Team at Thomson Reuters published the following Silver Supply & Demand table:

GFMS-Silver-Supply-Demand-2015

As we can see, they do a much better BANG UP job with their data by also subtracting Silver Bar & Coin demand from their total supply figures.  They first arrive at an annual Physical Surplus or Deficit.  I didn’t highlight this but it’s located right below total Physical Demand.  Once they get that figure they adjust for any ETF or Exchange Inventory Build, positive or negative.  Lastly, they end up with a NET BALANCE which is highlighted in yellow.

This is the true overall surplus or deficit figure for the silver market.  As we can see, the GFMS Team shows annual silver deficits as far as the eye can see.  Okay at least for the past decade.  I took these figures and made the chart below (also included data for 2004):

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

So, if we are going to use real professional data, the silver market suffered a 1 billion oz net deficit since 2004.  How Mr. Christian can say, “The silver market is in surplus” is beyond me.  Of course Jeff Christian is probably guilty of using semantics in his official statements to the press.  There is probably some excellent reason why Mr. Christian tends to ignore silver investment demand in his surplus-deficit figures and is more negative about silver than other analysts.  However, we can plainly see from the data above,  Jeff Christian is most certainly talking out of a different part of his body than the folks at GFMS.

Sorry to be blunt here, but the evidence proves who the guilty party is here.

SILVER OUTBREAK:  Investment Demand Will Totally Overwhelm The Market

Some readers may think that is a hyped title.  Sure, it may be… but it’s true.   I have said countless times in articles and interviews that investment demand will be the driving force for the silver price in the future, not industrial demand.  Jeff Christian tends to harp on industrial demand.

Yes, it’s true… industrial demand has been falling and WILL CONTINUE TO FALL.  According to the figures by the GFMS Team, industrial silver demand was 645 million oz (Moz) in 2010, but has fallen to 570 Moz in 2015.  Sure, that might include falling Photography demand, but that’s part of industrial consumption.  And remember this, a lot of silver used in photography is recycled.  So, as silver photography demand declines, so does the amount of recycled silver.

So once again, for all of the Mainstream silver analysts out there… forget about INDUSTRIAL SILVER DEMAND as a determining factor for price going forward.  It’s a non issue.  The key will be investment demand and I have a chart to prove it:

Estimated-Global-Silver-Bar-Coin-Demand-2015-X2-X4

According to the data by the folks at GFMS, total Silver Bar & Coin demand was a paltry 51.2 Moz in 2007.  This surged after the U.S. Investment Banking & Housing Market collapse to 240 Moz in 2015.  While GFMS reports a total of 206 Moz for Silver Bar & Coin demand, they do not include private rounds and bar demand.

In an email exchange with the GFMS Team, they told me that getting figures for private silver rounds and bars was quite difficult.  However, they were working on a system and would be publishing this figure in the future.  They “unofficially” stated in the email that estimated private silver rounds and bars was likely 30-40 Moz in 2015.  This is how I came up with the 240 Moz figure shown in the graph above.

In discussions with many analysts, I came up with a figure of 0.5% of the market was buying silver.  Official estimates put the figures of global precious metal buying at approximately 1%.  So, in all reality… global silver buying is probably less than 0.5%.  But, let’s just use that figure as a ballpark.

So, once the world starts to wake up to the fact that they are the BIGGEST PAPER BAG HOLDERS of increasing worthless paper assets in history, there will be a mad rush into the silver market.  Thus, if we had just a doubling to 1%, it would be 480 Moz of physical Silver Bar & Coin demand.  And a quadrupling of 2015 demand would equate to 960 Moz.  Just think about how that would impact the annual surplus-deficit figure… LOL.

I actually believe just a doubling to 1% and 480 Moz of physical Silver Bar & Coin demand would totally overwhelm the market.  Why?  Because I haven’t even included the huge inflows from the Mainstream Investors.  The same Bloomberg article linked above published the chart called Silver Hoarding- ETF Demand:

Silver-Hoarding-ETF-Inventories

As we can see, global Silver ETF’s added a whopping 500 metric tons in the past several weeks.  That turns out to be 16 Moz.  I would imagine Mr. Christian will also omit this data when he regurgitates his 2016 silver surplus figures next year.

I believe the reason Christian suggests that the silver markets has been in a surplus because he doesn’t see investment as true demand like industrial consumption.  Most of industrial silver is lost forever, while a Silver Eagle coin is likely held in private hands waiting for the opportunity to sell it at a much higher price.  However, most physical silver investment is being held TIGHTLY and will enter back into the market because its owners realize the Global Financial System will get flushed down the toilet when the Central Banks lose control.

While we have no idea if all of this silver is actually being deposited at these ETF’s, it is a sign that the Mainstream investor has a lot of leverage in the market.  Actually, the Mainstream investor has more leverage because they comprise 99% of the market while the precious metals investor is 1%. 

It makes a great deal of sense why the Fed and Wall Street continue to downplay gold and silver.  Because a small percentage switch of investors into these metals would totally overwhelm the market and price.

Fortunately for precious metals investors, this is only a matter of time.  While Ponzi Schemes can go on for many years, they all end in a disaster.  The present insanity and extreme volatility in the markets provides us a clue that the END maybe coming a lot sooner than we realize.

IMPORTANT NOTE:  I will be publishing new BULLET REPORTS shortly on the precious metals, mining and energy markets.  These will be shorter reports at a very modest fee.  My plan is to publish about 1-2 a month.  These will provide more detail not covered in the public articles.

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40 Comments on "SILVER OUTBREAK: Investment Demand Will Totally Overwhelm The Market"

  1. This makes the right silverstocks to best investment of all times ! At a silverprice of 200 Dollar some stocks should become 1000Bagger! http://gebert-trade.weebly.com/1000-bagger-potential.html

  2. Good article Steve 🙂 A friend gave me some advice some time ago, he said, “Most people are very mediocre”. This is obviously true in Mr Christians case. BUT then the financial industry is full of these very mediocre people IMO.

  3. speakyourmind | March 11, 2016 at 3:12 pm |

    I have a theory why CPM Group subtract out Photography, Jewelry & Silverware, Electronics & Batteries, Solar Panels and Other Uses to arrive at their surplus figure and leave out bullion. Maybe they assume Photography, Jewelry & Silverware, Electronics & Batteries, Solar Panels and Other Uses are to unrealistic to recover economically. The investment bullion is not being destroyed for industrial purposes so is available as a surplus at the right price.

    • A lot of this stuff eventually ends up on junk piles in third world countries “speakyourmind”. they don’t think its uneconomical to recover.

      Many charity clubs collect this stuff and forward it on in container loads.

  4. Jean Manson | March 11, 2016 at 3:39 pm |

    The Central Banks are loosing control…NEGATIVE INTEREST ON SAVINGS????…..LAST GASP MANEUVER TO STEAL PEOPLES MONEY…NEXT 401K AND THE REST TO PAY FOR MASSIVE TRILLIONS IN DEBT ALL OVER THE GLOBE….I DOUBT BOUGHT AND PAID FOR…BUT IN GENERAL HIDING THE TRUTH OF THE COLLAPSE THAT IS MOVING CLOSER BY THE DAY…OWNING PHYSICAL PRECIOUS METALS IS THE ONLY INSURANCE AGAINST THE COLLAPSE OF FIAT PAPER CURRENCY (S)…FOR TRADE AND BARTER…OR TO PURCHASE…….WHAT A BIG PONZI (SP) SCHEME…….

  5. Good statistical forensics, Steve, its what makes your site so credible

  6. OutLookingIn | March 11, 2016 at 4:48 pm |

    Congratulations Steve, on this article making as a banner piece on zerohedge.

    This article will awake more people to the amount of misinformation and from where this misleading information stems from. Its no secret that the bullion banks in conjunction with the LBMA and backed by certain central banks, have capped the price of both silver and gold for many years.

    The one major weak link in the current Wall street Ponzi scheme, is having gold and silver show their true valuations in the worlds paper fiat, backed by nothing but “faith” currencies. You see, the powers that should not be, have the ability to print as much of this fiat paper as they want. However, they cannot print gold and silver! Which are the ONLY true wealth preservers.

  7. The commercials are trying to keep silver in the descending wedge. I shorted gold and silver on the massive commercial COT position yesterday and made some bucks.
    Silver has record shorts on it. It is obviously the battleground. Silver is holding up pretty good considering it is having the kitchen sink thrown at it at the moment.
    I will purchase more eagles on Monday. For me it’s like the COTs are giving eagles away at the moment for free.
    A bag of silver eagles for two clicks of my mouse.

  8. I have to wonder where that billion ounces (31.1kt) came (or more precisely, comes) from? It is greater than a year worth of world production. Actually, that number puts in question the validity of all official data on silver supply and demand, and by extension on other similarly ‘sensitive’ materials.

  9. I still use very high end large film cameras, so I better hurry up and get my film developed before there is no more silver or the price to developed is astronomical.

  10. Note that silver pundits said silver isn’t a precious metal but an industrial metal. However, it is shown here that “… industrial demand has been falling and WILL CONTINUE TO FALL” , making silver liken to gold by the day. When the precious metal door start closing, the average joe (majority of us) could only afford to buy silver, even though silver would be expensive, as they would be price out of gold.

    • One-gram bar of gold is in the price range as one-ounce silver item. There is lots of that.

      • Please define “lots”.

        If/when/once 100 million US citizens decided to each buy 1 such 1 g gold bar, are there going to be 100’000’000 such bars (100 metric tons) ? And if each of them wanted 4 or 5 such bars ? Or 10 ?? When real fear (which we have not seen yet) kicks in, there will be very little fizzical PM (gold or silver) available, IMHO. At least not for prices remotely close to what we have right now. Time will tell.

        • Lots as a number of one-gram items on offer: Valcambi, Perth Mint and so on — in production, hence if there is a shift in demand from 1 ounce to 1 gram due to price shift up by an order of magnitude, producers will make more of smaller bars and less of larger kinds.
          As for 100 million group doing the same thing at the same time, I doubt they will have that problem. You know well people like plastic over anything solid, as plastic opens credit. When real fear kicks in, they will storm a grocery store with plastic at hand, not a gold shop or an airport with bags of cash. There have been calamities on a comparable scale that gave a preview of real fear — Katrina for example. Even cash was an advanced form of concentrated value for most, as most were reliant on plastic. I read a details story of a prepper who wrote down his experiences. He met people who rescued their 30-some piece set of kitchen appliances, and had to be helped by him with basic survival items and cash. So I would not worry about an unsatisfied demand for gold from 100 million (30%) of US citizens in a state of real fear. They will likely be fighting each other for food and household items at shops, rather than standing vigils in million-man lines for gold or a last flight out. I may be wrong, time will tell indeed.

        • A convincint picture to make a point. Have a look — it is 100oz silver, well in the range of 1oz gold dollar equivalent. No one of the proverbial ‘100 million US citizens’ (people on the street) wants it, some even for free.
          https://www.youtube.com/watch?v=6gmp2IqReFQ

  11. Great piece.

    Inflation of the 1970’s pushed gold up 15 fold in price, (from $35 to $500 /oz). It’s not unreasonable to expect a 5-10 fold increase in gold over the next decade considering the debt mountain that is being constructed. If and when gold appreciates silver will follow. If the gold silver ratio gets part way back to the historical average, say 40:1, silver could be worth $150 -$300 per oz. early in the next decade.

    As people wise up to the inflation that is eroding there saving I see millions turning to precious metals to preserve their wealth. The chart showing the impact of current silver investment doubling and quadrupling really puts current silver production in sharp focus. Your spot when when you say investment demand will overwhelm the silver market.

    Silver is an outstanding investment.

  12. Joe Lindell | March 12, 2016 at 6:33 am |

    So much for peak oil? I told you for the last 5 years that it’s supply/demand. By 2025 about 1/3 of the USA
    will be solar, hydroelectric and wind. Another 1/3 will be natural gas meaning oil demand will decline
    significantly. And as to the preaching of FIAT currency, the USA dollar is still strong. Why? Because the
    rest of the world is worse off. They are heading into negative rates for investors. This means foreign money will head to the USA. So far, every article I’ve read by you gurus has not moved the needle one
    bit. Silver is still not in demand. People don’t see it as money. And if silver demand rises a smidge to where the spot price is $20 there will be many mines coming on line to supply silver. Your only hope
    in demand is that the National Debt becomes a significant force to the USA budget. For 2017 Obama
    is requesting 4.2 Trillion. Taxes only pulls in 1.6 trillion so he’ll take out 2.6 trillion over the nexy 10 years
    in T-Notes. The USA is an innovator. Many smart people are involve who have billions. Nothing, so far,
    has materialized. Butler has called a crisis these past 30 years and Morgan & Schiff the last 10 years.
    If you buy silver, buy it for your grand children.

    • Apparently you like to voice your frustrations with posts like this; the underlying issue seems to be that the silver you have bought has not performed well measured in currency over the last few years. And you extrapolate it will be that way almost ad infinitum.

      You mention things that have been addressed over and over in past columns [that you have probably read], like on solar and wind electricity generation. It isn’t economically viable on anything other than small scale, so they will NEVER replace oil. Also it takes a lot of energy from oil to produce and install wind turbines, solar panels and arrays, the wiring that connects them all.
      As for natural gas, this isn’t so unlimited such that “1/3 will be using natural gas…”. Natural gas is found and extracted in similar ways to oil, and it will have to cost about 3 times what it currently does to be economically viable NOW, let alone in 2015.

      It is absurd to say “silver is not in demand”, it is just how much demand.

      It is absurd to say “And if silver demand rises a smidge to where the spot price is $20 there will be many mines coming on line to supply silver.” That price won’t budge miners much. Silver is in short supply on the natural resource side, except under the oceans. If you don’t want to believe any USGS data, or believe what declining ore grades are telling us, go right ahead.

      Also it isn’t lack of demand keeping silver below $20. It is a lack of investor demand that hasn’t broken the market manipulation that keeps the price down.

      If you can secure your silver for your grand kids after you are gone go right ahead. Or sell yours now and move on to something that makes you more happy.

    • When the little Greece situation unfolded you could not buy silver coins for weeks. What would happen if the worlds banks collapsed?
      The charts are saying something is about to happen in silver. It could fall to 12 bucks but..
      All the technicals, the incredibly oversold MacD, the bullish descending wedge in both price and gold/silver ratio and the massive volume from the commercials indicate it is about to explode higher.
      One thing is for sure, this sideways pattern we are in won’t go on much longer. They never do.
      I used to swing trade the COTs but lately I will only day trade them. One day the COTs will fail and we will have a massive COT induced short squeeze and I think it is soon.

  13. Silvrwillwin | March 12, 2016 at 7:43 am |

    “… industrial demand has been falling and WILL CONTINUE TO FALL”
    Do you really believe that industrial silver will just go away ?
    Or is this just a temporary thing. There are so many uses for physical silver as well as new discoveries being made that it’s hard to believe that industrial usage of Ag will become a thing of the past.
    Water filtration systems and medicine worldwide are developing into immediate need for future silver alone.
    New technology and industrial means will without a doubt play a HUGE role in civilizations advancement.

    I’ll bet a silver eagle that the phizz will be in the center of it all.

    • I hear they are planing to put silver futures contracts into solar panels.

      • Silvrwillwin | March 13, 2016 at 7:32 am |

        Ha, Good one Barry. It will be interesting to see how far solar panels do go. Right now the industry is like the wild west.

  14. Another excellent analysis by Steve Angelo. The only thing I would point out is that not only have the Silver ETF’s added a whopping 500 metric tons in the last few weeks , but the build up of the silver inventory at the Shanghai Futures Exchange warehouses is the last few months is just unbelievable!
    SHFE Silver Inventory 08/11/2015 : 250 metric tons
    SHFE Silver Inventory 03/11/2016 : 1,333 metric tons
    This is all happening while the Comex registered Silver inventories are dwindling near an all time low.

  15. If the 90 million full time workers in the US each bought only 5 oz. of silver in one year the price would skyrocket as about half of global production would be off the market. So there is a lot of potential without even considering foreign demand.

    • I doubt they will ever buy so much and if they want to, there will be only silver paper for sale.

  16. Warning. I just looked at the gold and silver COTs and they look terrible. A smash is coming I’m going to short gold and silver. I see gold and silver going back to the 1100 and 14 handle.

    • Barry,

      Go ahead and short gold and silver. However, at some point the Bullion Banks will be on the wrong side.

      steve

      • I do not think so while the chinese oligarchs refuse to fight western banking cartel but chinese officiales mantra is strong with the weak and weak with the strong.
        paper will rule on physical markets for several more years but at some point bullion banks will decide that is their interest to be on the long side of the trade. Still not the case…

        • Silvrwillwin | March 14, 2016 at 12:20 pm |

          The Golden Jackass along with 5 to 6 others don’t agree with you ! Time to grab some popcorn and a cold one , sit back and see if the fireworks begin soon !

          • Jim Willie is a complete clown/moron because he has not understood anything capitalism : not a theorical view from the late 19th century, the real one…

          • Silvrwillwin | March 14, 2016 at 6:34 pm |

            “anything capitalism” …what , do you live under a rock !? Capitalism has been a thing of the past for some time now ! What you perceive to be “capitalism” are just fumes in the air. That ship has sailed dude – wake up !!!

      • I have to clarify that I recommend only day trading PM futures at the moment for that very reason. And to put every cent you make into silver eagles as I do.
        For me the COTs are like free silver. It’s real money for jam.

    • I don’t assume the COT data is always on the up and up. If they are that is the only thing coming from these organizations that is. They aren’t independently audited.

      What if COT reports themselves are becoming a method of manipulation?

      Why would they be 100% honest in this area? Disregard for CFTC rules has been blatant.

      • Just heard a great interview from Rob Kirby about possible news coming out soon about PM manipulation. He also speaks to the COT report at the 20:00 mark.

        http://www.davejanda.com/guests/rob-kirby/sunday-march-13-2016

      • “I don’t assume the COT data is always on the up and up.” David your level of understatement is amusing. It’s a friggin’ ponzi scheme and everybody knows it. They don’t even cover their tracks anymore.
        They are basically saying short PMs here. Trading real markets used to be hard. Day trading these COTs is as easy as pie.

  17. About the paper short position of the bullion banks… Some of these might well be true hedges for bars the banks bought or own, some of these might be clients (e.g. miners) that sell forward future production, some of it may be naked shorts ? Their algos likely sell every little rhino horn and buy each tiny dip, so we will likely never know the exact prices (and what leverage they use for short and long) and what is really their books (lots of paper promises, but how much of the real goodies). It looks to me the bullion banks are still in control for now, but the writing is on the wall. At some point they will run out of metal as prices are simply too low (especially silver) and then this will all blow up in their faces. Great work Steve.

  18. silverfreaky | March 15, 2016 at 10:09 am |

    It seems 15$ is a silver price for the next years.The silver price dreams fade away.
    Without inflation – no silver and gold party.What did i say!

    • What you said as I recall was we needed more physical demand.

    • I think the MacD and the RSI will have something to say about that. They never stay extreme oversold. It is an absolute certainty they will at least return to zero on the weekly and they can’t do that without the price going up.
      That goes for the gold/silver ratio as which is even more oversold. Unless you think “this time is different”.

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