Silver Investment Demand

[Luker]

2015 RECORD SILVER INVESTMENT RATIO: 1% = 30%

Filed in News, Precious Metals by SRSrocco on October 21, 2015 8 Comments


It looks as if 2015 will turn out to be a record year for silver investment demand. Not only will total silver bullion demand be the highest in many decades, it will account for nearly one-third of total fabrication demand. This is a huge increase when we consider less than 1% of investors are buying silver.

We can thank the huge surge of physical silver investment in 2015 from record Indian (Silver Bar) and North American (Official Silver Coin) purchases. According to ETF Securities Q3 2015 Precious Metal Report, India is now on track to import a stunning 350 million oz (Moz) of silver in 2015:

In addition, India accounted for 71% of total silver bar demand in 2014 (2015 World Silver Survey). Compare that to the total U.S. and Royal Canadian Mint's Silver Eagle & Maple Leaf sales of 73.2 Moz in 2014. These two Official silver coin sales accounted for 68% of total Official Silver Coin sales in last year.

While it's true that Silver Eagles and Maples are sold to other foreign countries, the majority of Official Silver Coins are purchased in North America.

Physical Silver Investment Estimated To Hit Record In 2015

Not only will physical silver investment demand hit a record in 2015, it will account for nearly one-third of total fabrication. This includes industrial, jewelry and silverware demand. If we look at the chart below, we can see the huge increase in physical silver investment demand since 2006:

(My edit: cumulative ~1.47 Billion ounces investment demand over the last decade )

In 2006, investors purchased 49 Moz worth of physical silver bar & coin compared to 884 Moz of industrial, jewelry and silverware demand. Thus, silver bar & coin demand was only 6% of total fabrication demand (including bar & coin) in 2006. However, this physical silver investment ratio surged to 24% in 2008 as investors purchased record silver bullion during the collapse of the U.S. Investment Banking & Housing Markets.

Even though the amount and percentage of physical silver investment fluctuated over the next several years, it is estimated to reach a record 260 Moz in 2015, accounting for 30% of total fabrication. The figures from 2006 to 2014 are based on data from the Silver Institute. The Silver Institute publishes figures obtained from Thomson Reuters GFMS who produce the World Silver Surveys.

I estimate total silver bar & coin demand to reach 260 Moz in 2015 based on record Official Silver Coin demand as well record India silver imports. My 260 Moz figure is only 16 Moz higher than the previous record set in 2013 at 244 Moz.

Regardless, only 1% (actually less than 1%) of investors in the world are buying physical silver. Which means, 1% of investors are controlling 30% of total silver market demand. While the rest of the world is consuming silver in the form of industrial applications, jewelry or silver ware, just a fraction dominate all physical silver investment on the planet.

This is a stunning statistic. Eventually, we are going to see 1-2% more investors wake up to the fact that silver is one of the most undervalued assets in the world. When this occurs, annual physical silver investment demand will surpass 500 Moz, thus totally overwhelming the market and price.

https://srsroccoreport.com/2015-record-silver-investment-ratio-1-30/

 

[willrocks]

Demands for physical silver is now higher than 2011, yet silver price is still well below half what it was. The supply side of the equation hasn't substantially changed so it doesn't make much sense to me.

 

[dccpa]

Demands for physical silver is now higher than 2011, yet silver price is still well below half what it was. The supply side of the equation hasn't substantially changed so it doesn't make much sense to me.

The author imagines what he wants to see. Industrial demand is falling a lot more than investment demand is rising. But let's ignore that and simply look at 2013. Investment demand went up 105 million ounces, yet silver went from $30usd to $20usd.

 

[Shippeevt]

Yea Must be me I've been buying slot this year lol

 

[monopolize]

Demands for physical silver is now higher than 2011, yet silver price is still well below half what it was. The supply side of the equation hasn't substantially changed so it doesn't make much sense to me.

Paper silver supply is unlimited.

 

[SilverDJ]

It looks as if 2015 will turn out to be a record year for silver investment demand. Not only will total silver bullion demand be the highest in many decades, it will account for nearly one-third of total fabrication demand.

Ultimately is this a good thing or a bad thing for silver prices though?
I can't help but think that the higher the silver production and percentage of total fabrication figures go, the more "meh" silver will become?
Like everyone is buying silver because *insert reason* so the market gets flooded with the stuff. What driver is there then for the price to go up in this case?

 

[Porcello]

It looks as if 2015 will turn out to be a record year for silver investment demand. Not only will total silver bullion demand be the highest in many decades, it will account for nearly one-third of total fabrication demand.

Ultimately is this a good thing or a bad thing for silver prices though?
I can't help but think that the higher the silver production and percentage of total fabrication figures go, the more "meh" silver will become?
Like everyone is buying silver because *insert reason* so the market gets flooded with the stuff. What driver is there then for the price to go up in this case?

It depends on the reason people bought silver. What happens if the price of silver go higher? Will the same people who bought this year flood the market to take profits or will they hold? And how big will they be compared to industrial demand?

 

[Luker]

It looks as if 2015 will turn out to be a record year for silver investment demand. Not only will total silver bullion demand be the highest in many decades, it will account for nearly one-third of total fabrication demand.

Ultimately is this a good thing or a bad thing for silver prices though?
I can't help but think that the higher the silver production and percentage of total fabrication figures go, the more "meh" silver will become?
Like everyone is buying silver because *insert reason* so the market gets flooded with the stuff. What driver is there then for the price to go up in this case?

It depends on the reason people bought silver. What happens if the price of silver go higher? Will the same people who bought this year flood the market to take profits or will they hold? And how big will they be compared to industrial demand?

I agree. Assuming that the number of full-time employed workers in the US for example is 100 million , and if hypothetically 100,000 of those (1:1000 or 0.1%) are stackers who purchase on average 500oz/year , for a total of 50million oz /year , one could imagine that the majority of those individuals have bought into the narrative that precious metals are the best store/preservation of weath to offset any eventual loss of confidence in fiat currency. In particular, many of course believe that silver is greatly undervalued and thus plan to hold for the next five or ten years to ride through the expected future economic uncertainity and perhaps to see that value (purchasing power) eventually monetized at a multiple of that value currently held (??2 , 3, 5+ times). Most assuredly there are those buying silver in smaller amounts, and some who are purchasing for the possibilty of a short-term flip , but unlikely that they are a large percentage of those stacking, as there are numerous other financial instruments that more effectively serve that purpose, and for which one need not pay a premium (or an as large premium) to enter.

Cheers,
Luker

 

[Pirocco]

Demands for physical silver is now higher than 2011, yet silver price is still well below half what it was. The supply side of the equation hasn't substantially changed so it doesn't make much sense to me.

The author imagines what he wants to see. Industrial demand is falling a lot more than investment demand is rising. But let's ignore that and simply look at 2013. Investment demand went up 105 million ounces, yet silver went from $30usd to $20usd.

Industrial Fabrication (in Moz)
2004 608.9
2005 637.1 > 639.1
2006 645.2 > 646.7
2007 656.7 > 659.2
2008 651.3 > 554.1
2009 540.2 > 642.2
2010 643.2 > 645.1
2011 624.8 > 628.3
2012 589.1 > 595.2
2013 586.6 > 597.9
2014 594.9
The last figure is the last revised one.
To me, it doesn't look like industrial demand saw a big change.
There isn't much correlation to the price anyway.
Just compare the 609 of 2004 and the $5 with the 625 of 2011 and the $35.
What remains as explanation: investment and... disinvestment.
The author expects alot more demand, but the bigger the existing stockpile the more that will be sold.
Usually, speculative markets work another way: buy when least others buy, and sell when least others sell.

 

[Pirocco]

Note the evolution of the Comex futures market net total position for silver (expressed in contracts of 5000 oz):
20/10/2015 66800 $15.86
23/06/2015 29477 $15.96
10/03/2015 33263 $15.78
16/12/2014 33997 $15.87
04/11/2014 12408 $15.77
These are selections of a similar price level as last week (around $15.8)
A year ago, at this price it was 12408 x 5000 = 62 Moz
A week ago, at this price it was 66800 x 5000 = 334 Moz.
That's over 5 times bigger.
It's clear that the real market (those contracts are bogus silver orders since they nearly always get cancelled instead of delivered) purchases alot less silver, with dealers & co temporary holding up the silver price this artificial way.
I didn't buy silver so far this year, a next bottom of 10000, with 70 Moz per price dollar, may result in a price of $11. Most of my silver was bought at $30 so I can use some $11 silver to improve the ugly pic.

 

[sterling-nz]

Note the evolution of the Comex futures market net total position for silver (expressed in contracts of 5000 oz):
20/10/2015 66800 $15.86
23/06/2015 29477 $15.96
10/03/2015 33263 $15.78
16/12/2014 33997 $15.87
04/11/2014 12408 $15.77
These are selections of a similar price level as last week (around $15.8)
A year ago, at this price it was 12408 x 5000 = 62 Moz
A week ago, at this price it was 66800 x 5000 = 334 Moz.
That's over 5 times bigger.
It's clear that the real market (those contracts are bogus silver orders since they nearly always get cancelled instead of delivered) purchases alot less silver, with dealers & co temporary holding up the silver price this artificial way.
I didn't buy silver so far this year, a next bottom of 10000, with 70 Moz per price dollar, may result in a price of $11. Most of my silver was bought at $30 so I can use some $11 silver to improve the ugly pic.

$30 an ozt?
You just reminded me why i enjoy reading your comments.
As much as i hate long term DCA you will be able to do a quick buy up in the low teens to DCA down to something a little more palatable.
Long term (no longer than 20 years) even your $30 will give you a return of 35% +.
I enjoy that you collect a lot of data after being stung and you do not try to blame anyone for your slightly early buy in.

 

[Pirocco]

I doubt that return will be in real terms (=recovering purchasing power loss / being able to buy back the value I produced for it). My 2011-2012 big silver loadup hung around 28 euro per ounce, my last much smaller purchase was 15 euro per ounce. In the case of a 15 euro per ounce average for the next 2 decades, to correct the loss of the former, it needs an equal euro amount swapped at moments of 10 euro per ounce and sold at price of 20 euro per ounce.
I bought at 28 euro and last time I held off at just above 15 euro. In the real market situation, 10 euro has a chance, but it is possible that the futures market hedge is held high for a long while.
Just look here:
http://finviz.com/futures_charts.ashx?t=SI&p=m1

The surface between green trendline (indicating the size of the hedge) was quite big for the "bull" period 2002-2012. It brought many new precious metal dealers and the Exchange Traded Funds into existence.
Maybe the "bear" market period will manifest itself as the opposite, precious metal dealer and Exchange Traded Funds out of existence. After the couple bear market years we saw, that is not the case yet.
I'll wait and see, and revise when I see reason to. It may be like in wars: the best plans can fail on the battlefield. Because there are plenty parameters involved, the silver market and its silver stockpile has competing markets and stockpiles out there, and those can also go in both directions.
Like it is now, it looks abit like a stalemate, it needs a scientific/technological>economical progress in a similar degree as during the last couple decades of the previous century to compensate for the State theft. Without, things can only detoriate like in the completely State-driven Russia and satellite countries. There is already alot conflict in the world. Terrorism is just like war: it origins from misery and conflict and those in turn origin from State. There is a growing population part that parasites and a shrinking part that undergoes their theft and that is a scenario that is bound to end in any way including the hard way.
At some point I decided to not leave my savings in the parasites hands and silver was my first and very bad attempt at it. During the last couple years, I started to stockpile a variety of stuff at pickpeckers' prices on flea markets and alike, things that I can use myself in the future, or perceived as liquid and quality enough to get back what I paid in the real (not State's mathematically defined) terms of purchasing power.
Though silver was handier to store than my flea market-collected stockpile lol.
It's all part of my middlefinger to State and parasites.

About "slightly early buy in", that was a way too late buy in, and regarding blaming others, I can only blame myself for doing the markets homework post mortem. As a kind of countering / revenge, I publish the results of my post mortem homework, so that it's less homework for those after me that try the same as me. United against State, haha. A joke with a serious edge though: State drives on divide and conquer, and not allowing them to divide and instead work together, goes straight against this strategy.

About the road I chosed now: I spend 10% of my income remainder for "flea market based stockpiling" (hehe), and I leave the other 90% in the hands of the parasites, just like in my pre silver era. But now I have a silver shotgun with a clearer and wider scope than a cloudy fisheye. I consider DCA as a bad strategy because I consider anything that is dead-easy as a losing way. My goal is to pinpoint moments and use the cannon instead of the pistol.