The U.S. Silver Market Experienced Two Significant Developments In August

According to the USGS most recent report, the U.S. silver market experienced two significant developments in August.  From the data published in the USGS August Silver Mineral Industry Survey, U.S. silver production declined significantly while silver imports surged to near record highs.

First, U.S. silver production in August is down a stunning 14% compared to the same month last year and down 10% versus the previous month:

us-silver-production-aug-2016

This is certainly a big decline compared to the trend earlier in the year where the average U.S. silver mine supply was approximately 95 metric tons a month.  What makes this quite surprising is that the price of silver hit a high of $20.7 in August, nearly $5 higher than during January-March.  So, why is U.S. silver production declining so much as the price continued higher??

I called up the USGS Silver Specialist and left a message on their answering service as to the details why silver production in the U.S. declined so much in August.  If I receive a reply, I will update the post.

Secondly, the U.S. silver imports hit a near record high of 581 metric tons (mt) in August versus 502 mt in July and 464 mt in June:

u-s-silver-imports-jun-aug-2016

This large jump in U.S. silver imports is interesting as demand for the iShares Silver ETF was basically flat in August.  Even though the SLV ETF silver inventories surged during the first half of the year, it was relatively flat in July and August.

What I found also quite interesting is that the U.S. imported 55 mt of silver from Poland in August which was half of their total monthly mine supply.  Poland produces about 105 mt of silver a month.  Normally, Poland exports no more than 10-20 mt of silver a month to the United States.

For whatever reason, U.S. silver imports surged as the price hit a record high of $20.7 in August.  As I mentioned, this silver did not make its way into the iShares Silver SLV ETF as their inventories remained flat.  So, where did it go?

Well, according to the information from the COMEX, total inventories on the exchange increased from 153 million oz (Moz) at the beginning of August to 163 Moz by the end of the month.  Thus, the COMEX silver inventories increased 10 Moz or 311 metric tons in August.  Thus, some of the nearly 80 metric tons imported by the United States in August made its way into the COMEX silver inventories.

Of course, that is if the COMEX holds all the silver it states in its inventories or if each silver bar doesn’t have several owners.

Regardless, to see such a large decline in U.S. silver production in August was quite surprising.  Furthermore, the Silver Institute just put out their 2016 Interim Silver Report which they state that world silver production is forecasted to decline in 2016.

Unfortunately, once U.S. and global oil production starts to head south in a big way, world silver production will most certainly follow suit.  More about this in future articles.

Lastly, I will begin posting articles by The Hills Group on the oil and energy market this weekend.  Bedford Hill of The Hills Group, has a wealth of knowledge on the oil industry, their ETP Oil Model as well as other aspects of the energy industry.  I will be posting The Hills Group short response to the USGS announcement of a new 20 billion barrel oil resource in the Wolfcamp Shale formation in Texas.

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34 Comments on "The U.S. Silver Market Experienced Two Significant Developments In August"

  1. Precious metals will rise because EROEI will make them more scarce in the future. However the first priority of many will be to secure their food and real asset supplies. So why not invest in companies like FPI (https://www.google.com/finance?q=NYSE%3AFPI&ei=sHMvWKH6NcKVUuLEqqAG) or real assets (
    http://www.investitin.com/category/agriculture-and-forestry/ ) Mobile wealth will be hard to secure but a reliable food or wood source even more difficult IMHO,

  2. The iShares Silver SLV ETF was basically flat….

    Yup. Everything turns flat when there’s no way out.

    Look at GLD, https://www.freegoldclock.org going down like a hammer on steroids, Fofoa’s gadget btw

    Suddenly looks like a msm news feed. Alarm bells anyone?

  3. The US Mint has cancelled all current orders from authorized purchasers for 2016 bullion ASE’s and stopped production as of today according to some websites.

    • Barry,

      The US Mint stopped production for awhile in August due to a build up of inventory resulting from a lack of demand.

      I find no evidence that there has been any cancellations of orders.

      SteveW

      • I understood all of that has sold out and they shut down for the year, no more inventory. Retooling for 2017 issue now. Last year was 2nd week of December when they shut down. Not sure if that is of any significance shutting down this early compared to last year or other years?

  4. Steve, you wrote, “Unfortunately, once U.S. and global oil production starts to head south in a big way, world silver production will most certainly follow suit.:”

    Steve, I still don’t see this. If oil production declines, the price will go up. If the price of electricity goes up because of higher fuel costs, then the demand for solar arrays will increase, thus causing higher demand for silver. Higher demand means higher prices, more mines increasing production, more employees who need transportation to get to work, and higher demand for fuel for that transportation. Higher demand means higher prices. Higher prices for oil means more exploration, more production, and at the margin, higher prices paid for that oil.

    If I agree that oil production has peaked, I see silver being in increased demand because it cannot reasonably be substituted in many applications, and if a stronger trend toward efficiencies in industry continues, because of let’s say, shortage of oil / fuel, then silver will be in even bigger demand. The world needs silver. If 1 gram of silver is needed for each cell phone (a made up number) the cell phone manufacturers can pay ten times the present price without affecting the selling price of a phone. I strongly believe that the demand for silver will continue to grow and the price will rise. Silver production will not get squeezed out by higher oil prices. Other purposes for oil at $125.00 per barrel will be outbid by silver producers.

    • The world cannot afford $130 oil. It would bite a large chunk out of the economy because people can afford less cars, houses etc.
      $130 oil is needed for the industry to make drilling profitable. Cheap oil to provide growth is gone. So we won’t grow. And that’s a nasty feature with billions looking for yield, like pension funds. So, less spending, even with rates near zero.

      You cannot sell oil for $130 when only 5% of world population can afford it. Printing the money and lower rates doesn’t work in the long run. They have tried as we know.

      Every day you have to walk one extra mile for your food. After 3 months you’re dead.

    • Charley Z,

      The reason why you don’t see a falling oil price as production declines is due to OUR BRAINS being taught that “SUPPLY & DEMAND” are the economic forces that determines price. THEY DON’T.

      We have been HOODWINKED, BAMBOOZLED.

      The Hills Group ETP Oil Model shows that the price of oil has been based on its cost, not supply and demand. This is due to THERMODYNAMICS.

      Furthermore, in a recent article, I showed that the top two gold mining companies, BARRICK & NEWMONT’s cost of production increased 470% from 2000-2012, while the gold price increased 498%.

      THIS IS NO COINCIDENCE.

      Thus, if we use LOGIC, REASONING and COMMON SENSE, we find that the idea of SUPPLY & DEMAND is total RUBBISH.

      Why? Because all the supply and demand forces for gold from 2000-2012, did not seem to impact the price above and beyond the COST OF PRODUCTION.

      steve

      • “Thus, if we use LOGIC, REASONING and COMMON SENSE, we find that the idea of SUPPLY & DEMAND is totally RUBBISH.”

        Sorry Steve, but the numbers just don’t support this position. If it were strictly true the price of gold would not have increased 28% over the production costs (a total net increase of 5.96%).

        As for oil, the argument is only supported by the oil output of the UK and not any of the others; See http://graphics.wsj.com/oil-barrel-breakdown/

        While the interaction may be very complicated, the Laws of Thermodynamics do not trump the Laws of Supply and Demand.

        SteveW

        • SteveW,

          Okay, 94-95% based on cost, and 5-6% based on Supply & Demand. Does that make you happy.

          I should have clarified my position. Supply & Demand forces are SEVERELY OVERRATED. The price of most things, ENERGY, COMMODITIES and METALS is based 95% on COST and 5% on SUPPLY & DEMAND forces.

          Thus, the PRICE TREND LINE of a commodity is predominately based on its COST. However, supply and demand move it up and down off the COST TREND LINE.

          steve

          • It doesn’t make me happy, it makes me believe that we are missing a major variable.

            When oil was well north of $100/bl every company was printing money and borrowing truckloads of money based on the belief that it would continue indefinitely. Clearly price was not based on costs but something has changed dramatically in the last year or two. I am unsure of what it is and have not read or heard any theories addressing the apparent relationship change.

            My belief is that it is important and, without fully understanding it, it is impossible to make any accurate predictions or plans.

            Thanks for all of your hard work.

            SteveW

          • SteveW,

            It has taken me time to truly understand the work of THE HILL’S GROUP. It wasn’t the money printing that caused the price of oil or its cost to go to $100. Rather it was the cost of oil going up to $100, that caused the Fed and Central Banks to print money to keep the system solvent.

            Just FIGURED that one out.

            steve

        • SteveW, ‘they’ turned money into politics aka currency. It will fail. All the fuzz about details isn’t really important.

          As soon as the intermediate of exchange –> “money”, becomes an entity of its own, you’ll need to frontrun the history books.

    • If, according to your theory, that the gold price is based on its production costs and not arbitrage of the market place.
      Why have the major banks including Deutsche bank, been prosecuted for known precious metals market manipulation?
      The natural dollar price for gold is the US monetary base divided by its gold reserves. Any other value is by set by force. The dollar only functions as a fiat currency by force, hence the title fiat.

  5. Thanks Steve, interesting as always.

  6. I took note of Tom Cloud’s forecast of a silver shortage by the fall of 2016. It is as wrong as his telling
    consumers to buy silver. He has been wrong about buying silver each year for the past 7 years. If
    you did as he suggests you’ve lost money these past 7 years. If he is the analyst that is claimed, why
    did he tell consumers to buy silver so prematurely. The Silver Institute validates a silver deficit every year from 2006 thru 2015. The deficit totals 1.2 billion ounces. I must conclude that miners have been stockpiling? If so, where can I find out the miner’s inventory of silver. Based on these deficits, the price of silver should be rising not falling. Before I buy again, it would be great to know what I’m up against.
    What if the miners have several billion ounces in storage? Is this why silver is heading to $15 rather than $20?The demand assuredly has exceeded production but since demand is being met, where is the silver coming from?

    • Gold and silver are a hedge against currency. If you are buying it to make more of the thing you are hedging against it doesn’t make sense.

    • What if? What if?…no facts just speculation, if you read the articles and don’t agree, then sell your PMs and move on. Constantly requiring reinforcement for your waivering belief system becomes boorish over time.

    • DisappearingCulture | November 19, 2016 at 8:36 am |

      “I took note of Tom Cloud’s forecast of a silver shortage by the fall of 2016. It is as wrong as”

      The information in this article supports silver shortage…at least in the U.S.

      “. He has been wrong about buying silver each year for the past 7 years”

      How is he wrong? Just becasue the price in dollars hasn’t gone up in the time framework YOU think it should?

      “Before I buy again, it would be great to know what I’m up against.”

      I don’t think you should but again, becasue you seem to be torturing yourself by buying or holding silver.

      “The demand assuredly has exceeded production but since demand is being met, where is the silver coming from?”

      That question has been asked by people who have more knowledge about silver than 99.9% of others.Eric Sprott to name one.

  7. Steve , your words : ” For whatever reason, U.S. silver imports surged as the price hit a record high of $20.7 in August.  As I mentioned, this silver did not make its way into the iShares Silver SLV ETF as their inventories remained flat.  So, where did it go?
    Well, according to the information from the COMEX, total inventories on the exchange increased from 153 million oz (Moz) at the beginning of August to 163 Moz by the end of the month.  Thus, the COMEX silver inventories increased 10 Moz or 311 metric tons in August.  Thus, some of the nearly 80 metric tons imported by the United States in August made its way into the COMEX silver inventories.
    Of course, that is if the COMEX holds all the silver it states in its inventories or if each silver bar doesn’t have several owners.”

    This is a prime example of the gray area that the Comex ,CME , wall street , central banks , and so on have and take the advantage of due to the fact that the price is hinged on paper trading and not actual hard numbers based on physical.
    I do believe that it will take something as you put it “U.S. and global oil production starts to head south in a big way, world silver production will most certainly follow suit.”…to really call the true price of physical gold and silver for what they are and where they stand as true value.

  8. DisappearingCulture | November 19, 2016 at 8:47 am |

    Steve,

    How about a similar article on gold?

    Here is a comment on another web site:

    “Gold production more than doubled since 1980 . As a matter of fact, gold production is not only rising, but it still exceeds the worldwide demand for physical gold (including China, Russia and India). Indeed, the manipulation of the gold price would be impossible if demand for physical would exceed the supply of physical gold. Not only is the price manipulated, but the demand for gold is also managed.”

    Doesn’t seem to match what I have read elsewhere.

    But as Joe says above, where is all this silver [and gold] coming from to meet all of this reported demand?

  9. This is utter rubbish.
    Wheres the facts, I remember reading an article that silver was heading for $600oz, now its struggling below $20oz.
    Every time the price increases these stories some out, along with nicely coloured graphs only for the price to fall again, then theres silence.

    These stories are designed to prompt buying so people who have a lot of silver can sell and make money.
    lets wait for the next round of bs from these authors.
    Paul

    • Paul,

      I see you are one of the SHORT TERM distraught precious metal investor. Precious Metals should be acquired like a retirement account. It is impossible to know what the ultimate value of GOLD & SILVER will be, but they will be much higher in relation to most other assets in the future.

      People need to stop worrying about the paper price. Instead they should focus on OBTAINING OUNCES.

      steve

  10. Steve.
    Not disgruntled, I bought my silver as a long term investment.
    Im just fed up with the b.s. you are telling people and lets face it, most of what you predicted has never happened, if I lived in America and read half of the drivel you have told people, I’d be a doomsday prepper.

    • Well, its your choice to drown with the rest. You’re in for a quick profit? Central banks and gov are distorting everything with their politics, because if they don’t the whole financial system comes crashing down.

      That’s why your quicky doesn’t come due. The system goes more crazy by the day and we should appreciate the effords of people that provide information about the direction we’re going.

      Do your homework.

  11. Magyar= Hungarian | November 20, 2016 at 3:28 pm |

    I have to agree with Paul , with all what he said.I don’t know you Steven, and many other writers what you get out of writing these articles ,but it is very disappointing .Year after year ,the same old story, and pretty much always everything is wrong,with the predictions. Nothing makes any sense , there is always an other explanation why things did not work out etc… And the expected change ” the great silver, gold shortage” etc ,is always put a few months , or a year ,or even two years into the future. I just feel bad for those,who buy into the B S….., These are the people who think that you writing is the holy gospel. i am sorry , but you are wrong,just like all the great gurus of PM. Like David Morgen,Mike Meloney, Eric Sprot.Bo Polny ,Peter Shiff, to name a few.

  12. Steve,

    One needs to take into account the actual withdrawal of metal from COMEX in order to work out how much silver has needed to be imported in order to maintain vaulting levels.

    With silver withdrawals having reached 1,432t so far this year there has had to be quite a significant amount of re-stocking on a monthly basis, which probably accounts for most (if not all) of the imported silver.

    I worked out the monthly difference in total inventories plus metal withdrawn and found the following tonnage was required to be deposited for the period of interest in your article.

    May 371t, June 740t, July 112t, August 270t = c. 1493t

  13. Thanks Magyar= Hungarian.
    Yes I’ve told loads of people, who have been out and spent all their savings on silver that there is going to be a silver price boom, based on these fanciful stories these guys make up.

    I Googled ‘Mike Maloney’ and was surprised what results came back for ‘Phoney Maloney’.
    Was shocked that these guys make big money from leading people up the garden path, so to speak.

    • Your dollar depreciated 94%, and counting.

      Your grandchildren are up to their eyeballs in debt, not even born yet.

      Conventional oil peaked a long time ago, dollars are coming out of the Eccles building like a horny ’30’s oil well.

      This is not about silver pumping dude. Now do your homework.

  14. Homework all done,
    over 80% of whats been predicted on these ‘reports’ has NOT HAPPENED.
    Which is a pretty rubbish success rate.
    So maybe time for you to take the blinkers off and do your homework

    • Paul,

      You are free to continue BELLY-ACHING to your hearts desire via your comments. However, I would like to remind you that the quadrillion in Derivatives and the exponentially increasing U.S. and Global Debt are not sustainable. While the precious metals community may have been wrong on the TIMING, we won’t be wrong on the outcome.

      Now, if you or I had the lifespan of a GNAT, then maybe your constant BELLY-ACHING would have some merit. But, humans live long lives. So, stick around a few years and come back and let us know how things played out.

      steve

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