Why Are The Chinese Stockpiling Silver? Big Price Move Coming?

It looks like something big may happen to the silver market and the Chinese are preparing for it.  After China launched it’s new Yuan Gold Fix today, the prices of the precious metals surged.  At one point today, silver was up 5%.  Silver is now trading at the $17 level, a price not seen in over a year.

Even though gold has taken center stage today due to Chinese rolling out there new Yuan Gold fix, something quite interesting has been taking place in the silver market over the past six months.  While Comex silver inventories have been declining from a peak of 184 million oz (Moz) in July 2015 to 154 Moz today, silver stocks at the Shanghai Futures Exchange have been doing the exact opposite.  And in a BIG WAY:

Shanghai-Futures-Exchange-Silver-Stocks-2015-2016-NEW

Shanghai Futures Exchange (SHFE) silver inventories bottomed on August 20th 2015 at 233 metric tons (mt), or 7.5 Moz.  However, silver inventories at the SHFE began to really pick up in 2016 as they surged to 802 mt in Jan from 596 mt in December.  This continued at a more rapid pace during the next few months reaching a staggering 1,706 mt today (54.7 Moz).

Thus, silver inventories at the SHFE have more than tripled in less than six months.  Why have the Shanghai Futures Exchange silver inventories jumped this much in such a short time? Do the Chinese know something we don’t?

To give you an idea just how much the SHFE silver inventories have grown, let’s compare it to largest bullion bank Comex silver inventories in the world… JP Morgan.  There’s been a lot of talk about the huge buildup of silver on JP Morgan’s Comex inventories.  Here a chart of JP Morgan’s Comex silver inventories, courtesy of Nick Laird at Sharelynx.com:

JP-Morgan-Comex-Silver-Stocks

JP Morgan started accumulating silver right at the price of silver topped at $50 in 2011.  In April 2012, JP Morgan had about 4 Moz of silver in its inventories.  JP Morgan’s silver inventories continued to grow as the price of silver declined to a low of $14.  Today, JP Morgan holds 69.4 Moz of silver in its Comex warehouses.

However, the Shanghai Futures Exchange silver inventories surged at a much more rapid rate.  If we take a look at the chart below, you will see what I mean:

JP-Morgan-vs-SHFE-Silver-Inventories-NEw

It took four years for JP Morgan to build their silver inventories from 4 Moz to 69.4 Moz today, whereas the SHFE silver stocks jumped from 7.5 Moz to 54.7 Moz in only eight months.  And remember, most of the silver inventory gains at the SHFE came in the past four months.

Part of the reason for the increased silver stocks at the Shanghai Futures Exchange was probably due to the Chinese government abolishing the ban on silver concentrate imports in November 2015.  According to the article, China abolishes ban on silver concentrate ore imports, unwrought bismuth exports:

China has abolished its ban on imports of silver concentrate ore and its refined concentrates, as well as exports of unwrought bismuth effective November 10, the Ministry of Commerce said in a directive posted on its website Tuesday.

MOC said the abolition is due to those products having complied with the country’s industrial policy, do not belong to high-energy consuming and high polluting sectors, as well as having comparatively high technological content.

Regardless, the Shanghai Future Exchange silver inventories have never been this high before.  The highest level they reached was 1,143 metric tons back in May 2013.  For whatever reason, the SHFE is accumulating a lot of silver, and quickly.

Global-Solar-Power-InstalledAs I mentioned in my previous article, Record Breaking Silver Factors In 2015 Can Make 2016 Quite Interesting:

India and China plan on adding a lot of Solar Power by 2020-2022.  India plans to reach 100 gigawatts by 2022 and China 100 gigawatts by 2020.  That will take a lot of silver.

Either way, China is accumulating a lot of silver compared to the net exports years ago.  If the new Chinese yuan gold fix is going to put a lot of pressure on the U.S. Dollar in the future, mainstream investors may need to start protecting themselves now before it may be too late to acquire silver at a reasonable price.

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24 Comments on "Why Are The Chinese Stockpiling Silver? Big Price Move Coming?"

  1. While time frames are always illusive, I continue to believe that obtaining Phyzz Silver is going to become very frustrating for stackers; I am fully convinced that premiums for Silver are going to mightily tick upward through the summer —and by Labor Day premium will equal or even exceed the spot price. (The various Mints are not going to be able to to keep up with demand on top of all the other bullish headlines.)
    2016 is NOT going to be anything at all like the last several years have been….not at all…..

  2. Indian Silver Imports on Pace for New Record in 2013 – and this too seems to have made the price… drop.

    June 15, 2013 – Silver Price to Rise as Top Miner’s Production Evaporates – $22 to $15 almost 3 years later.

    July 16, 2013 – U.S. Mint Shows It Sold 27 Million Silver Eagles in July – meaningless.

    August 1, 2013 How Falsified U.S. GDP Data will Lead to Much Higher Precious Metal Prices

    July 29, 2013 – The Inevitable Rise in Silver, It’s the Energy Cost – I can appreciate long terms calls so we’ll let this slide but so far he’s be waaay wrong.

    July 25, 2013 – SILVER: The King of Future Investment Gains – hmmmmm – it was $20.50 at that time. Lost 25% in under 3 years.

    August 29, 2013 – Precious Metals Will Rise As the Economic Recovery Disintegrates – no particularly ground-breaking news but the inference of the article is in an imminent collapse.

    August 27, 2013 – Canadian Maple Leaf Sales Beat All Records – ho hum.

    August 21, 2013 – SILVER EAGLES SALES: Signaling Much Higher Price Gains Ahead – no this is simply untrue – it is, instead, signaling that you have no idea what you are talking about.

    September 9, 2013 – The Energy Factor to Push Gold to New Highs – talk about no vision…

    October 4, 2013 – The Calm Before The Precious Metals Storm – the storm that decreased the prices? $21.70 t0 $15…

    September 18, 2013 – 500 Silver Eagles To Purchase A Home in the Future – perhaps this is predicting a decline in real estate? $8900.00 USD a home? what is it? a fancy tent? maybe he was referring to Detroit.

    November 4, 2013 – Coming of QE5 & Much Higher Precious Metals Prices At the time the price of Silver was $22.00 / Gold $1320… it’s only gone down.

    October 21, 2013 -Silver To Hit New Highs Despite Bearish Forecasts – looks like the bearish forecasts were right this time

    October 15, 2013 -The Key Factor To Drive Gold & Silver To Extreme Values – as you seem to be the contrary indicator would it being you calling a price decline?

    November 13, 2013 – SILVER BEARS: You Have Been Warned – better warn them again Rocco – I don’t think they heard they were too busy counting their profits.

    December 27, 2013 – Silver To Hit New Highs As The Quality Of Analysis Sinks To New Lows – well, some analysts…

    December 22, 2013 – Silver Price To Head Higher As Cost of Production Forms A Base – sigh – still forming that base, Rocco?

    January 13, 2014 – The Coming Silver Game Changer – waiting on pins and needles – can’t you give some hints? What is it? Record Coin sales, again?

    January 5, 2014 – Where Is The Price Of Silver Headed In 2014? Silver was $21.50 at the writing of the article where Rocco said: “Whatever the price movement, I doubt we will see much lower prices” – I guess that begs the questions what do you mean by ‘much’?

    February 28, 2014 – Silver Will Be The King Precious Metal Performer – since penned the SGR (Silver-Gold Ratio) has only, relentlessly, risen…

    May 13, 2014 – U.S. Mint Sells More Silver Eagles In A Week Than Gold Eagles Over Past Three Years – I have no idea what value this information is.

    July 2, 2014 THE COMING TWO-STAGE RALLY IN SILVER -one, or both, of the stages seemed to have stalled.

    July 28, 2014 – Three Signals For A Huge Silver Spike In 2014 – was $21.50 at the time – nothing but a decline from that level since.

    August 8, 2014 – 2014 Official Coin Sales: Silver The Big Winner – win what? Another 20% decline in price?

    September 16, 2014 – The Silver Sentiment Cycle — Turnaround Coming? – no, more failed predictions coming

    September 29, 2014 – Record September Gold Eagle Sales… A Big Price Move Coming? – years of writing about huge coin sales with the price dropping but he is nothing if not consistent.

    May 27, 2015 – Something BIG Is About To Happen To Silver – Big?

    July 6, 2015 – Has The Global Run On Silver Begun? Shortages On The Horizon? – no, Mr. Roccco, on the horizon are your continued stubborn predictions…

    • Dude,

      Silverbugs are masochistic by nature. We love this shit. Go pester Jim Cramer.

    • might be right this time

    • @ Goldrules

      Watch “The Big Short” and how Christian Bale’s character, Michael Burry, was the first to make big bets shorting the housing market…how he had to sweat when he was early and didn’t know exactly how long it would take to burst.

      Every ounce of metal in hand is a short contract with no expiration on the current financial system.

    • Mike Christman | April 20, 2016 at 4:29 am | Reply

      Might want to add the Deutsche Bank article admitting to silver price rigging. This may help explain why, when obvious factors happen that should cause market movements in silver, nothing…or even the opposite…happens.

    • Fantastic analysis! You hit the nail om the head. All Rocco must do now to his forte’ is sell silver
      for a few miners. After all the $21 dollar production cost is now under $10. The only hope silver
      has is demand far exceeding supply. We must get people to buy silver. All this news in the end
      is proved to be meaningless and it is been going on for a few decades.

    • Robert Hermens | April 20, 2016 at 9:03 am | Reply

      Well that’s convenient! You want to unwrap the silver narrative to reflect your own narrow point of view. Let’s broaden the horizon of your time line a bit. Silver spot price at the end of 1999 was $5.33, today (April 20, 2016) silver is priced at just over $17.00. That is more than a 300% gain!

      Further, you can only hold a beach ball under water for so long before nature wears you down, just ask Duetche Bank.

    • Stubbornness is what brings the eventual payday. Net worth is proportionate to patience in investing and holding the right investment, not in the timing of it. If it silver was the wrong investment, people would flock to it.

  3. 2 things:

    As long as the metals are being set by paper contracts from London/NY/COMEX then they will go to whatever price the bankers want.

    Bear markets act different than bull markets, the same indicators do not work for both for example the COT numbers are not as effective in a bull market as they were in a bear market.

    Cheers,
    Mr.T

    • And this is evident in what has happened so far

      http://www.gold-eagle.com/article/they-lit-first-candle

      • Bill Hotler and Jim Sinclair are complete clowns to not say more.
        Always wrong, always…
        This jackass (the first one) thaught when BRICS would sell their T bonds, yields will rise !
        USFED and proxy bought eveything and yields fell. period.

        • A predictable reply from you. As they say a broken clock is right twice a day. You can hate someone and they are still right occasionally. You dismiss someone here as ever being right by trashing them personally. Sad.

          • I do not hate them, by the way a clown is not an insult imo, I just wondering how they had not changed anything after being wrong so long and so many times…

            By the way Hotler is rude according to himself, I was also nearly insulted ( but that’s OK !) in an email when I wrote him that long term rates would not rise.

  4. Nice article, thanks. Just wondering if we are in for a pump and dump, given all the news lately.

    • The rise was done in USA not china, today, the rise was done by china and annihilated by london.
      In USA the stocks are rising when there is no strong buying. Maybe the same in china especially when VAT on silver is not removed (17% compared with 0 on gold).

      • Thanks I was wondering about the Vat on silver in China regarding chinese purchasing silver over gold. Chinese accumulate on lows, west on price run ups.

  5. This article is about accumulation of physical silver, not about the fiat price of silver.

    Now give us the buying power numbers of the $ over the past 50 years.

  6. Less than two years ago we were talking about the low inventories at the SHFE being bullish for silver. The twists in logic just make your heard spin.

    (For the record, I am very bullish on silver.)

    Mike

  7. En france comme en amerique c’est pareil, ont voient que tous vous etes dans le silver , et qu’un article ne se passe pas comme prevu et vous critiquer rocco , mais messieurs allez voir ailleurs , si vous n’etes pas satisfaient des articles

    • Yandex translated, not sure I understand it.

      In france as in america it is the same, have to see that you all are in the silver , and that an article does not as expected and you criticize rocco , but gentlemen are going to see elsewhere , if you are not satisfy articles

  8. Silver / gold bug are rather ignorant of economics and the reasons why these ‘investments’ are nearly worthless and impractical for the average person. Articles that promote the buying / investing of silver or gold are really just thinly disguised propaganda pieces to get customers to buy from affiliate advertisers and in some cases, the authors themselves.

    The metal is near-useless and is not the ‘store of value’ or investment as claimed. Both gold and silver have been widely advertised but rarely found profitable for the average ‘investor’ who must carefully time the purchase and sale (converting fiat money each time) in order to achieve any profits (which are often as not, no profit at all, but actual losses, especially when considering inflation and purchasing power of the fiat currency you wind up with).

    Nobody will actually accept gold or silver for things you actually need, gas, food, clothing, housing, transportation, etc., but this critical fact is always ignored by its promoters.

    There are in fact over a hundred sound reasons to NOT buy into the hype of gold or silver. What once was a store of value is no longer – digital currency now rules the day and it will always forever rule the day as the fiat money that it is. Investors hoping to make a profit will sit and their ‘investment’ until enough gullible people buy into this scheme once again and THEN and only then, does it become a actual investment. Most people cannot wait that long or tie up that much fiat money and will wind up losing a percentage of their money (at the very least).

    Gold is for fools in reality and so is silver. It’s a ponzi scheme that relies on hype and propaganda and the ignorance of the general public to buy into while the only people really making any profits are the sellers of the bullion themselves. Every gold / silver article is designed to fool the gullible. Don’t fall for it. There are far better things to ‘buy’ as investments that have real value, real use and real need. Gold and silver are not among them.

    http://survivalacres.com/blog/better-than-gold/

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