Silver – Is the Perfect Storm Brewing in the Physical Market? - Rory Hall

Silver has been money longer than gold. Silver is called the “people’s money”, while gold is called “money of kings”. In the U.S., silver was an integral part of our monetary system until 1964 when it was removed from coins. This change has not slowed the depletion of above ground silver stocks, nor has it changed the volume of silver being used, on a global scale, for everything from computers, TV’s, cell phones, bombs and solar panels to name but a few. Silver is vital manufacturing material in today’s world and, as stated, is money.

This is to say nothing of the investment demand that has exploded over the course of the past ten years. Investment demand for silver coins and bars has never been higher. The U.S. Mint, Royal Canadian Mint and Perth Mint all set new records for silver in 2015. All three of these mints are on pace for another new record in 2016. Physical silver is in high demand for every purpose in which it can be used.

Let’s review some of what we know to be absolute facts regarding physical silver in 2015-2016 and beyond.

• China and India both have massive solar energy programs for each country – which requires, literally, tons of silver
• China alone will produce over 100GW (gigawatts) of solar power by 2020 (they are currently way ahead of this deadline and may increase the amount of solar power they produce) – this will power some 300 million homes (100 million U.S. equivalent)
• Morocco has plans to energize over 1 million households with solar power by 2018

As noted in the following interviews with Jeff Brown, China Rising, China has been importing raw silver dora bars as well as silver ore/concentrates. This means China will take all the physical silver available in whatever form is readily available. This is to say nothing of the fact that China mines approximately 100 million ounces of silver annually on her own soil!! That is massive demand for a single item.

Solar Energy Drives Silver Demand in China

Unlocking the Secrets to China’s Silver Demand

If we look at the mining industry, which is how silver comes to market, we see an industry that has been abused, unloved and drained of capital inflows for the past 3-5 years. Without mining companies digging silver out of the ground silver will be completely depleted and we will only be left with above ground inventory. This will never happen, but the mining industry is a capital intensive industry and without new inflows of capital, either from the sale of their product, at a profit, or investment capital, mines begin struggling and, in a lot of cases, will slow down or shut down the operation very quickly.

This has been the case over the past several years.

• China is buying, outright, or acquiring controlling shares of mines around the world – primarily gold mines, but probably silver mines as well
• First Majestic, a primary silver mining company was recently contacted by a large technologies manufacturer to directly purchase silver from the source
• U.S. Mint has, not only sold out 100% of their stock on three different occasions in the last three years, but have been rationing sales of American Silver Eagles since June 2015 with no sign of change for the near future
• U.S. Mint has set new all time sales records of American Silver Eagles for the past three straight and is on pace for another all time sales record in 2016 (personally I believe the U.S. Mint will manage their inventory and avoid a new record in 2016)
• Royal Canadian Mint has set new all time sales records for Silver Maple Leafs for the past two consecutive years and is currently on pace to three-peat
• Royal Canadian Mint (RCM), like the U.S. Mint has struggled over the past two years to keep up with demand. RCM, like the USMint sold out of product and had to shut down operations until they could produce enough product to reopen.
• RCM was completely sold out of 10 oz. silver bars between June 2015 and February 2016 due to a lack of product to produce the bars!
• Perth Mint, in Australia, set a new all time sales record in 2015 and is on pace to repeat in 2016

The interview below, with CEO, First Majestic, Keith Neumeyer was recorded on April 24, 2016. Keith, while not naming the company, explains how his silver mining company was contacted regarding a direct line of silver for one of the large technology manufacturers.

Silver, More Rare Than the Market Understands

As you can see owning physical silver may be to your advantage. While the most popular silver coins in the world are setting new sales records, entire nations are implementing silver dependent energy sources (solar) and the companies that can actually deliver the raw material are slowing or shutting down; this makes for a perfect storm in the silver market.

One las thing. On January 28, 2016 the silver futures market and the silver spot market (this is where the exchange rate (price) of silver is set) experienced a “glitch”. The market shut down for approximately 15 minutes while the “market makers” were attempting to sort out an anomaly that had occurred. The “glitch” was an $0.80 difference in the future contract price and the spot price of silver. This was a failure of epic portions by the people controlling the silver market. Just a few weeks later, Deutsche Bank, was found to have rigged both the silver and gold markets and within 24 hours of this unprecedented decision there were two civil class-action lawsuits brought against Deutsche Bank totaling over $1 billion.

Bill Murphy: All about the Physical Market; Takin’ These Bums Out!

The bullion banking cabal is in trouble. The physical silver market is on fire with demand. Physical silver supply is strained. The storm grows stronger by the day.

Got physical?

The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.