by Sean Broderick of Uncommon Wisdom Daily
Do you think silver is poised to go higher?
I sure do. That’s because I’m watching what is going on in the world’s
silver ETFs. I’m also watching the mountain of forces that are piling up to push
the metal higher.
Look at this chart. It shows all the metal held by the world’s physical
silver ETFs (black line). And all the metal held by the world’s physical gold
ETFs (blue line) …
I showed you this
same chart last week. Since then, silver ETFs have added another 8
million ounces. At the same time, gold ETFs have added only 56,000 ounces.
In fact, since late April, silver ETFs have added 31 million ounces of
the metal. Gold ETF holdings over that time frame have zigged and
zagged. But those are basically flat.
Kind makes you go “hmm,” doesn’t it?
Why is someone stocking up on all that silver?
I can think of a few reasons why …
Silver
ore in mines is getting less-rich. That makes sense, because miners
dig up the rich stuff first. And silver, like gold, is a depleting asset.
That’s why primary silver miners’ average yield has fallen from 13 ounces per
ton in 2005 to 7.4 ounces per ton in 2016. This is a 43% decline in just
12 years.
Silver
is an industrial metal. Half of silver demand is for industry. It
will be affected by China’s economic and industrial outlook. Both of those
are improving. Though silver demand dropped last year, it is zig-zagging
higher.
Global
silver production keeps falling. In fact, silver production fell
more than demand last year. That is probably why prices went up 9.3% last
year.
The Silver Institute reported that global silver production peaked in
2015. It takes years to bring a new silver mine online. And let me tell you, there
aren’t a lot of new silver projects around.
Looking at that earlier chart of silver ETFs, the recent demand trend
looks clear. (Up!) Now ask yourself, “What happens when silver demand goes
higher?”
Last year, the physical deficit was 52.2 million ounces, according to Thomson
Reuters. That was the third deficit in a row. And that trend is not about to
change anytime soon …Well, when you put together rising demand and falling
supply, you get a deficit.
Another Massive Deficit This Year
This year, it should be four years of deficit in a row. Banking giant HSBC
has forecast a 132 million-ounce deficit for 2017. That’s more than
double last year’s deficit.
Sure, not everyone agrees on the exact amount of silver supply … demand …
or silver in storage. That’s what makes a market.
But the forecasts of a deficit are backed up by what we can see on the
ground. Chile’s silver production dropped 26% in the first quarter.
Now, some will tell you that the silver market is always in deficit
lately. And the market never seems to care.
That’s true … to a point. That’s because the deficit can be made up by
above-ground stockpiles. But stockpiles will only last so long.
And that brings me back to that chart I showed you. I think someone is
betting that the time for a price squeeze is edging closer.
Solar Demand Could be Key
The difference may be photovoltaic demand. It climbed from 57.2 million
ounces in 2015 to 76.6 million ounces in 2016. And the solar buildout is
still ramping up.
Source
Forecasts by GTM Research predict that solar installations will double from
2015 to 2021.
I find that solar forecasts that go more than a couple years out are
generally unreliable. So far, they’ve always underestimated
real demand.
On the other hand, remember that the solar industry is getting
more-efficient in its silver use. Still, add it all up, and the demand trend
looks big.
That’s longer term. Is there a driver of silver prices in the
short term? Yes!
Let me show you one more chart. I snagged this from our friends at
BullionVault.com. It shows how hedge funds are betting on silver right now.
I’d say silver could go ballistic.Hedge funds are making a lot of bearish
bets on silver. But keep in mind that hedge funds are often wrong.
What do you suppose will happen if and when they have to cover those bearish
bets?
As published yesterday on
News and Commentary
PRECIOUS-Gold
rises as Asian stocks, dollar slip after oil slump (Reuters.com)
Gold
prices halt two-session skid as dollar stalls (MarketWatch.com)
Jobless
claims edge up; goods trade deficit widens (Reuters.com)
LBMA
launches code of conduct for precious metals markets (IndiaTimes.com)
Gold
used to deliver anticancer drugs into tumours (ScienceDaily.com)
Equities:
“Ding Ding”…Last Lap (Scribd.com)
SOMETHING
CHANGED IN THE SILVER MARKET IN MAY: Here Are 3 Reasons Why
(SRSRoccoReport.com)
Bitcoin
Twice as Expensive as Gold as Buying Frenzy Bites: Chart (Bloomberg.com)
As
Bitcoin Skyrockets, Trouble Is Looming (KingWorldNews.com)
Wine,
Art, and Ferraris: The Bubble in Luxury Goods (Mises.org)
Toronto
Homeowners Are Suddenly in a Rush to Sell (Bloomberg.com)
Gold Prices (LBMA AM)
26 May: USD 1,265.00, GBP 983.41 & EUR 1,127.87 per ounce
25 May: USD 1,257.10, GBP 969.48 & EUR 1,119.57 per ounce
24 May: USD 1,251.35, GBP 963.29 & EUR 1,119.58 per ounce
23 May: USD 1,259.90, GBP 969.62 & EUR 1,119.17 per ounce
22 May: USD 1,255.25, GBP 967.17 & EUR 1,123.07 per ounce
19 May: USD 1,251.85, GBP 962.17 & EUR 1,122.03 per ounce
18 May: USD 1,261.35, GBP 968.21 & EUR 1,133.95 per ounce
Silver Prices (LBMA)
26 May: USD 17.29, GBP 13.45 & EUR 15.41 per ounce
25 May: USD 17.15, GBP 13.23 & EUR 15.29 per ounce
24 May: USD 17.03, GBP 13.14 & EUR 15.22 per ounce
23 May: USD 17.14, GBP 13.22 & EUR 15.25 per ounce
22 May: USD 16.95, GBP 13.04 & EUR 15.10 per ounce
19 May: USD 16.77, GBP 12.90 & EUR 15.02 per ounce
18 May: USD 16.81, GBP 12.90 & EUR 15.10 per ounce
