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By the SRSrocco Report,
When the paper markets finally collapse, the silver market is set up for
much higher price gains than gold. Why? Because the fundamentals
show that precious metals investment demand has put a great deal more
pressure on the silver supply than gold... and by a long shot.
There are three crucial reasons why the silver price will outperform the
gold price when the highly inflated paper markets disintegrate under the
weight of massive debt and derivatives. While many precious metals
investors are frustrated by the ability of the Fed and Central Banks to
continue to prop up the markets, the longer they postpone the day of
reckoning, the worse the collapse.
The first reason I wrote about in my article, Critically
High U.S. Silver Supply Reliance In Jeopardy When Paper Markets Crack:
The United States silver net import reliance as a percentage of total
consumption, was 72%, versus 36% for copper and a negative 48% for gold.
This chart shows that the U.S. relied upon 72% of its domestic silver
demand from foreign sources in 2015. Thus, U.S. silver supply
reliance (72%) is double that of copper (36%), while U.S. gold demand enjoyed
a 48% surplus versus its domestic supply.
The second reason the silver price will surge higher than the gold price
is due to the amount of physical silver, in total ounces, purchased by
investors versus gold:
From 2010 to 2016, investors purchased a total of 1,505 million oz (Moz)
of silver bar and coin compared to only 284 Moz of physical gold. Thus,
precious metals investors purchased five times more silver ounces, than gold
ounces during this seven year time period.
Of course, the total value of physical gold investment was much higher
than silver during this time period, but this tremendous amount of silver bar
and coin demand has impacted the silver market much greater than the gold market.
This brings me to the third reason. Due to the huge amount of silver
bar and coin demand since 2010, the silver market suffered a net deficit of
801 Moz. However, the 284 Moz of gold bar and coin demand did not
impact the gold market the same way. According to the World Gold
Council, the gold market enjoyed a small 7.5 Moz net surplus during this time
period:
While it is true that World Gold Council may be underestimating Chinese
physical gold demand, and its impact on the annual surplus of deficit
figures, a 7.5 Moz surplus is only 3% of the 284 Moz total gold bar and coin
demand figure 2010-2016. However, the 801 Moz net silver deficit
is more than 50% of total silver bar and coin demand during that same time
period.
Which means, physical silver investment demand is causing much more stress
on the silver market than it is on gold. While the silver market has
been able to supplement the annual deficits with old silver coin stocks or
large bars that were liquidated during the 1990's, this is not an endless
supply.
According to the data I obtained from the GFMS Team at Thompson Reuters,
invested dumped a net 580 Moz of silver bar and coin on the market between
1995-1999. Now compare that to the past five years (2012-2016)
as investors purchased a net 1,152 Moz (1.15 billion oz) of silver bar and
coin.
And here is the CLINCHER. From 1985 to 2007, the total net silver
bar and coin demand was a NEGATIVE 95 Moz. Which means investors sold a
net 95 Moz of silver bar and coin in that 23 year period. However,
investors purchased a net 1,785 Moz of silver bar and coin from 2008 to 2016.
This is a huge TREND CHANGE.
After the U.S. financial and economic meltdown in 2007, investors continue
to purchase a record amount of silver bar and coin. This has put severe
stress on the silver market as the total net deficit since 2008 surpassed
1,155 Moz.
While the silver market will continue to supplement the ongoing annual
deficits with old silver stocks, this supply is not endless.
Furthermore, the days of the TRUMP STOCK MARKET RALLY are numbered. The
last time the stock market crashed 2,000 points in the beginning of 2016,
investors flocked into gold and silver in a BIG WAY.
In conclusion, the fundamentals in the silver market are setting up for a
much higher price spike than gold due to the three reasons stated in the
article. The timing of these event is hard to forecast as it is
difficult to pinpoint when the Fed and Central Banks lose control of their
massive market intervention. My work is not meant to provide a short
term outlook on the precious metals, rather it offers fundamentals that will
win out over the medium to longer term.
Precious metals investors need to look at buying and holding gold and
silver the same way an individual puts money away each month in their 401K,
pension plan or retirement account. The difference between the
precious metals investor acquiring PHYSICAL METAL compared to individual
acquiring PAPER ASSETS or DIGITS, is one is real wealth, while the other is
an IOU.
To understand why the markets may be heading for big trouble, check out my
article,
A Large Crack Appeared In The Global Market... And No One Noticed.
Lastly, if you haven't checked out our new PRECIOUS
METALS INVESTING section or our new LOWEST COST PRECIOUS METALS STORAGE
page, I highly recommend you do.
Check back for new articles and updates at the SRSrocco Report.
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