There’s a sleeping tiger in the silver market, and it isn’t the
Chinese. While the Chinese continue to acquire a lot of gold, they
aren’t that interested in silver. However; it’s the Indian investor who is
has been the dominant player in the silver market. Why?
According to an article
published last year on LiveMint.com, “Silver is so ingrained
in Indian tradition that the country’s currency, the rupee, is named after
‘Rup,’ the Sanskrit word for silver.” How interesting. I
have been doing research in the silver market for over a decade, and I just
found out from this article that India’s currency, the Rupee, is named after
silver. It just goes to show, we learn something new every
day.
Thus, it makes perfect sense that the Indians are the major player in the
silver market as their silver imports have accounted for a significant
portion of annual global mine supply. In a recent article by Louis at
Smaulgld.com, INDIAN
SILVER IMPORTS ON RECORD PACE THROUGH APRIL, he provided the
following charts on Indians monthly and annual silver imports:
(Indian Monthly Silver Imports)
(Indian Annual Silver Imports)
As we can see, India imported a record 902 metric tons of silver in April
since last year. Furthermore, as Louis states in his article quoted
above:
Indian silver imports through April 2018 were 2,889 or an average of 722.5
tons. If this average holds throughout the year, India would import
8,667 tons of silver in 2018.
If India continues to import the same amount of silver as it has over the
past four months for the remainder of the year, it will reach nearly 8,700
metric tons (mt) and surpass its previous record set in 2015 at 8,529
mt. Now, if India did import 8,700 mt of silver this year, it
would account for 32% of total world mine supply.
If you haven’t read Louis’s work at Smaulgld.com, I highly recommend
you check out his articles and website. Also, please consider
supporting his work because he is one of the few analysts out there putting
out new updated facts and data on the precious metals.
In this next chart, I show annual Indian silver imports as a percentage of
global silver mine supply:
Indian silver imports increased significantly from 2013 to 2015 as
investors took advantage of lower prices. However, the Indian investor
wasn’t as interested in acquiring silver in 2016 as its price surged to $21
versus $14 at the beginning of the year. But, as we can see in 2017,
Indian silver imports rose to 20% of global mine supply versus 13% in
the prior year. And, if Indian silver demand remains strong throughout
the rest of the year, it could surpass 8,700 mt and account for 32% of global
silver mine supply.
While it is true that Indian investors acquire silver during
falling prices, they also did so in 2011 when the silver price peaked at $49
in May of that year. We can see that as the silver price
skyrocketed higher, Indian silver imports nearly doubled to 20% of global
silver mine supply compared to 11% in 2010.
Which brings me to subject matter in regards to the title of this article,
I believe India is a MAJOR WILD CARD that the market is vastly
underestimating. Of course, many silver investors in the west have
become quite frustrated with the ongoing weakness in the silver price, but
the fact remains, the Global Markets and Financial System are still in
serious trouble.
What happens when the global markets finally start their major overdue
correction and investors begin to flee stocks and real estate to move into
the precious metals to protect wealth? Some analysts suggest that the
Bond market isn’t that safe this time around because a lot of individuals are
invested in Bond Funds, and not the real Bonds or Treasuries. Bond
funds are nothing more than BETS on BETS.
If Indian investors can import nearly a third of global silver mine
supply, then what happens when the Global Markets and currencies become under
severe pressure? How high could Indian silver imports go??
Thus, India may be the MAJOR WILD CARD going forward in the silver
market. Actually, once panic sets into the market, we could
see silver buying coming from areas and sectors that haven’t invested in
silver before. For example, when the silver price starts to surge
higher during the second phase of a market crash, we could see huge demand
come from the following:
- Industrial Silver Buyers
- Major Financial Brokers-Institutions
- Pension Funds
- Central Banks
The four categories listed above have not big players in the silver market,
but that could change at a drop of the hat as the market realizes, THIS TIME
IS INDEED DIFFERENT. Moreover, Central Banks have been net
sellers of silver over the past 3-4 decades. Most of the official
silver sales from the 1990’s to 2013 have come from China, India, and
Russia. But, what happens when Central Banks start to acquire silver??
Of course, this is mere speculation. And, I imagine the frustrated
silver investor reading this would believe this is just more hype in a market
that seems to be all be DEAD, but that is exactly when we experience a
bottom. Furthermore, U.S. silver exports jumped to the U.K. in Apri:
For whatever reason, U.S. silver exports to the London, U.K. jumped to
nearly 20 mt in April versus very little activity from Jan-Mar. London
is the major player in the silver market, and a large percentage of Indian
silver imports come from the United Kingdom. It will be interesting to
see how much silver India imports for the remainder of the year.
Regardless, I believe the Indian investor may be the “Major Wild Card”
once the markets become chaotic. Indian silver imports could jump to
more than 50% of global mine supply during the next market meltdown.
However, even if Indian investors demand more silver, it might not be available
(only at much higher prices) if Industrial, Institutional or Central Banks
start buying as well.
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