Silver Market Facts

The silver market is tiny.  About 700 million oz. of silver are mined each year worldwide.  About 200 million oz. recycled.  About 100 million oz. from "other" sources, like governments.  That's the supply side.  At $20/oz., this is a $20 billion annual market. 

On the demand side, most all or more of the silver that is mined each year is consumed and used up by industry.  Only 100 million oz. is bought by investors.  At $20/oz., that's $2 billion physical silver bought per year by investors.

These numbers don't change much from year to year, and two companies produce similar numbers, which you can look up at the silver survey companies cpmgroup.com and silverinstitute.com.

I know the 100 million oz. of silver investment demand is real, both from other sources and my own experience.  The US Mint produces about 40 million Silver Eagle coins each year, and Silver Eagles are not even half of the silver that well sell at JH MINT, Inc.  So, about 100 million oz. is about right for investor demand.  Those are real numbers.

(The good news for America is that USA's silver buying is nearly the entire world's silver investment demand -- it's all right here in America.  As silver stays in America, that bodes well for the future wealth of America!)

So, while I trust the data of the silver survey companies, I know that they are biased against silver, because they mis-lable investment demand for silver as "surplus".  But the reality is that "surplus" denotes something like left over war gear, or material produced that is unwanted.  But silver bought by investors is not unwanted, not at all!

The reality is that there is not nearly enough silver for investors.  There is a dire shortage of silver for investors.

The proof is in the numbers from the BIS, the Bank of International Settlements. 
http://silverstockreport.com/2011/BIS-DATA.html

The BIS figures show that BIS banks owe their clients about $150 billion worth of silver, (other precious metals).  This is 75 times as much as annual investment demand.  You might not think that is unusual.  However, in a six month time frame a few years ago, their figures increased from $100 billion to $200 billion. 

There is no possible way on earth, in my opinion, that banks could go out and locate, and purchase $100 billion worth of silver, or 4000 to 8000 million ounces, for their clients who bought that much silver for investment purposes.  That would have been about 7-13 years worth of world silver mine output.  It was well over 100 times as much as real world physical silver investment demand.

Banks such as Morgan Stanley confirmed this.  They were caught not going out into the market and buying silver for their clients, and yet, they were charging clients a 1% annual storage fee on their silver that was not in the vaults, because there was no silver, and there was no vaults.  In their defense, Morgan Stanley said that what they did was nothing unusual, but rather "business as usual" among investment banks.

Again, only $2 billion worth of money is actually flowing into the physical silver market. 

Yet up to $150 billion flows into the paper silver markets as is kept track of by the BIS.  This is the over the counter, non transparent market, not the LBMA market, and not the COMEX markets.  This over the counter market is huge, and before 2009, it seemed that nobody in the gold world knew where to go get some of this data on the opaque over the counter market. 

Don't believe me.  See it for yourself.  Here is the latest 2012 BIS report:
http://www.bis.org/publ/qtrpdf/r_qa1309.pdf
see page 144, Table 22A. "Amounts outstanding of OTC (over the counter) equity-linked and commodity derivatives" "By instrument and counterparty".   See or search the document for "other precious metals".  Look at the "notional amounts outstanding".  See figures range from 123 to 157.  Note, those figures are "in billions of US dollars". 

That means the BIS Banks have derivatives on their books with outstanding values of $157 billion dollars worth of silver, meaning, they owe their clients that much worth of silver, at roughly today's silver prices, or maybe in $30/oz. silver prices back in Dec. 2012. 

In my opinion, no entity on earth can go out and buy $157 billion worth of silver when the real silver market can barely handle the $2 billion of investor demand that exists today and regularly squeezes it, and causes dramatic shortages in supply, and long wait times.

What is a billion?  In context?

The Fed is buying $80 billion worth of bonds each month, to help prop up bond market prices, and to help keep interest rates low.

What do you think would happen if the Fed bought $80 billion worth of silver each month to help keep silver prices up?

What do you think will happen when the public starts buying $80 billion worth of silver each month, to help protect themselves from the inflation that is being caused by the Fed printing up $80 billion each month to prop up the bond market?

We regularly have people calling us up, saying that they want to sell bonds to buy silver.  The banks will use every trick in the book to keep you in bonds.  They will tell you that you can't get a safer investment than bonds.  They will tell you that you will have to take a penalty for cashing in your bonds early (without mentioning what the penalty will be.)  They will tell you that you will have to give up the interest for about a year, if you cash in your bonds early.  If pressed, they will admit that is usually less than 1%. 

Meanwhile silver prices are being artificially created by computers that "paint the tape" on the paper markets, and move by as much as 5% to 9% in one day.  It's almost as if we have a dictator shouting in a shrill voice, "silver prices today will be!..." and smashing a gavel to announce the dictated silver price.  But it's not that obvious, of course.  Silver prices are set by a panel of banks, and by high frequency computer trading by the banks back and forth. 

Therefore, I cannot predict in advance what the silver price will be, nor can I make any short term predictions from 6 months to 2 years, which are all "short term".  I can only know that in the long run, investors will surely wake up at some point, and buy far more than $2 billion of silver, or 100 million ounces per year.  But more like 100 times as much, for starters.

I only know that investors who have only slightly woken up, but who continue to trust their investment banks who lie to them, to buy silver for them, that they are being completely defrauded, and that their investment demand for silver is being fully diverted into paper, and away from real silver.

I only know that at some point, the system will break, and will break hard, and when it does, silver prices will rapidly begin to exceed $500 to $1000 per ounce.

A paltry $180 billion worth of investment demand for silver, which is a paltry 1% of money in the banks, will send the silver price soaring to $500/oz. just to start the major run up in silver prices to come.  (Assume 300 million oz. of silver is bought by that much, and you can see that $180,000,000,000/300,000,000 = $600.)

Silver prices are not being driven by "dollar strength" against other currencies.  Silver prices are not even being driven by investment demand nor industrial demand. 

Silver prices are being driven by the lies told by the liars, the lies they tell on the painted ticker tapes on paper silver trades driven by computers. 

The major driver of silver prices is that well up to $150 billion of actual silver demand, from people who have actually instructed their brokers to buy silver for them, has been diverted away from silver, through fraud.

The major driver of silver prices is that well up to $150 billion of actual silver demand, from people who have actually instructed their brokers to buy silver for them, has been diverted away from silver, through fraud.

Yeah, I re-copied that paragraph twice, on purpose, so you might get the point.  Those are all verifiable numbers, check the BIS link above.

Frauds tend to end suddenly and badly when people wake up to the fraud.

It's been 4 years since I have brought this BIS fraud to the attention to the people who read my email list.  I do not know how else to get this message out, other than by repeating myself to the point where my readers are getting bored of hearing it, while at the same time, my readers are indicating to me that they sometimes still do not understand it.  Some do get it, of course.  The buyers.  But interestingly, not all silver buyers have even heard of these wonderful facts about silver.

Well, those are the big facts about the silver market.  How about some small facts?

In 2003, investment deceivers, such as the shills who work for the investment banks who are all short of silver, were wildly screaming about how silver jewelry scrap would flood into the market if silver prices moved up from $4/oz. to $7/oz. and thus cap the price.  That never happened.

Even today, it can't happen.  Not through my shop.  Take a silver ring, for example.  We don't buy them.  We can't. It's not worth it.  Silver prices are at $20/oz.  A typical silver ring has less than 1/10th of an ounce of silver in it.  Thus, a ring has $2 worth of silver.  If I were to buy it at my standard rates, I'd offer $1.20.  But to be able to pay for the paperwork to handle the trade, the seller of one silver ring would have to pay me $10 just to take it.  Thus, it's completely uneconomic.

Furthermore, a typical silver ring retails for about $20.  This is well over ten times higher than the contained silver value at today's silver price.  The $20 barely pays for the craftsmanship, and the cost of retailing the silver rings, and the actual silver is barely even a cost.  Silver prices would have to exceed $200/oz. for the seller of a silver ring to break even, and that's even if they could sell silver in ring form at spot prices, which is not realistic, because rings are not a fungible shape for silver, like coins are!  And silver prices would have to exceed $400/oz. for the seller of a silver ring to be able to realistically break even if the refineries were giving a 50% pay out on silver scrap.

This is an example, and the reason that silver, in jewelry form, or in tableware form is, for all intents and purposes, "utterly consumed" and completely removed from the silver investment market.  Once silver is sold as jewelry or tableware, it does not come back as scrap for up to ten to twenty years, or even 100!.  Even then, there must be economic ways of recovering the scrap.  And this silver scrap buyer, JH MINT, Inc., does not even waste time with silver rings.  We are happy to buy silver spoons and fork sets at typically 60% of the contained silver value.  Silver handles on knives are not worth the time to recover.  Silver candlesticks are typically not worth the time to recover.  Silver plated items can not be recycled for the silver content. 

Ah, here's another little gem for the silver bugs.  There is no discernible difference between .999 silver and .9999 silver.  I finally have several sources that back up my statement.  First, in any melt bucket, all the impurities in the silver will rise to the top, and can be skimmed or blasted off of the top of the molten silver. But the melt bucket does not refine the silver, that's done through electrolysis. It's therefore the same process for .999 and .9999 silver.  The difference is only in the label and the marketing, in my expert, well researched opinion.  I have tested .999 silver on an x-ray fluorescence tester, and it reads out at .9999 fine.  I have asked several mints and refiners and industry experts all the same question, and they all say the same thing, they don't know of any difference between .999 vs. .9999 silver, because of all the same reasons, because it's all the same process, except for the final stamp at the end of the line.  Maybe .9999 silver is more fraudulent, because they are overselling their product?  Maybe .9999 silver becomes .999 silver if you contaminate it with a thumbprint?  But the melt bucket does not care or distinguish between 999 silver vs. 9999.  I am open to the possibility that I'm wrong, but so far, I have not seen any measurable difference between 999 vs 9999 labeled silver.

What is measurable?

The US Mint says they are making about 40 million oz. of silver Eagles each year, worth less than $1 billion.
The BIS says that BIS banks owe clients about $157 billion worth of silver.

Those are the facts.  You do the math, and you tell me where you think silver prices are headed.