The NOT Wall Street Perspective

I think I should have said, they are not just commodities. My point was that they differ from most commodities in the traditional sense since no more can be created.

 

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Yes, I meant the former of your distinctions, as in refined available silver ready for market. As far as how much total silver above ground, all of it that hasn't gone into space should still be here somewhere, but that doesn't mean we can get it. What we can get may need refinement, or have other costs incurred in resourcing it.

 

Not sure I follow

For 2011 the Silver Institute reports mine production increased 10 million oz while use from industrial applications decreased 13 million oz.

 

The Silver Institute reports that silver supply from mines, government sales, and scrap rose from 851M ounces in 2002 to 1,030M ounces in 2011. At the same time, demand from industry, photography, jewelry and silverware declined from 812M to 758M. Yet silver prices rose from $4.59 to $35.12 over the same time period. So unless the law of supply and demand has been repealed, this doesn't make sense. I guess they would have people believe that coin collectors control world prices for silver. I think there are problems with their data since it contradicts real world experience.

 

So you are ignoring the EXPLOSIVE demand for coins that has occurred in the last 5 years, and trying to say something is wrong with supply and demand? Demand does not CARE what the use is for, only that there is demand.

YES, I am trying to say "non-traditional" demand like the historically record setting mintages of about every bullion coin in existence the last few years HAS caused prices to explode. If industrial demand is steady, mining is up, what else really can explain it except inventory building, which has occurred as well.

Anyone can look as ASE mintages from 1986 to date. Which are, BY FAR, the highest mintages of the entire series? This trend has been followed by all bullion coins. From 1986 to 2007 the highest mintage year was about 11 million, and most were around 8 million. From 2008 onward ALL YEARS mintages are between 20 and 40 million. Multiply this times all bullions series and you see quickly where a few hundred million extra ounces have gone. YES, on the margin that quantity is enough to move the market.

 

And while we are at it, even if this was true(which it is not), can Inflexion or anybody else exlplain what this would have to do with the LONG term price of silver. For the short term, it is obvious, but for the LONG term I just just don't see how this is related.

To straighen things out of what is a commodity, silver and other metals, things you mine, are considered hard commodities, things like corn are, things you grow, are considered soft commodities.

Now these soft commodities have a shelf life, so there really is no true long lasting above ground supply. You sell it, you need more, then you grow more. This works fine, and in the short term, things like corn have shortages, like this year with the current drought. Corn goes up. But we grow more and eventually demand is filled and the price goes down. The fact that the ready for market supply has shrunk, does not have much to do with the long term price.

Silver is the same way, we use it, we need more and we dig it at approx $20.00 an oz. If we need more, we re-open mines, open new mines etc. So I fail to see the big deal about the above ground supply.

Now, before we get starrted that the below ground supply is running short, if that is anyone's argument, please make your case with hard facts. Any internet blogger clown can say whatever he wants, but there is no reliable study that shows we have a below ground shortage. So in short, I am not buying into the fact that there is an infinite supply of corn vs a limited supply of silver. Of course, from a pure technical view, this is true, but we are just not likley to see these limits come into play in our life times and should not effect our investment strategies. Maybe the people who are born in the year 3500 may need to think about this, but not us.

Mike

 

The Silver Institute data leads one to believe that the excess demand is being pushed by investment demand. Silver being used supporting ETFs, building gov't reserves and etc. Basically being stocked away in refined raw state form in warehouses.

 

I sold some silver and other pms today to Apmex, not sure if they are the top buyers but they are reliable anyway.

This from Bix Weir recently: http://www.roadtoroota.com/public/1000.cfm Sounds sort of hysterical if you ask me...

 

So add back the coins and you still have supply of 1,030M ounces vs. demand of 877M ounces, a margin of supply over demand of 17%. And this is up from a 1% margin in 2002. So no matter how you spin the data, the Silver Institute numbers don't add up compared to the price rise. They show supply growing faster than demand, and if true, the price should have dropped.

 

They imply this, but since the schedule only shows flows and not inventories it is impossible to say.

 

Now, if it is impossible to say whether justafarmer point is correct, by the same logic, wouldn't you agree it would be impossible to say the Silver Institutes data is wrong?

 

Yes. There is no way to know whether any of the data is right or wrong. To me, a lot of the numbers don't make sense. Everyone is free to believe what they want and use whatever data they think is valuable to their personal investments. So everyone should evaluate what I wrote and come to their own decision.

 

Well I only extracted 4 pieces of their data in my original post.

2011 mining production 761 million oz
2011 industrial usage 486 million oz

2010 mining production 751 million oz
2010 industrial usage 500 million oz

So which pieces of this data do you disagree with?
What is the corrected data?

 

I don't know what you are referring to as not being true because you didn't address the subject. If you mean that above ground refined available silver is not the lowest it has been in 700 years, don't take my word for it. Go out and DYODD and find a link even though we have apparently established that no data is reliable. I've read it plenty of places. I don't understand why you would care to know the impact of information you don't think is true (nor have you substantiated why to any degree), but if this is in fact what you are referring to the answer should be obvious. If there isn't enough silver available on the market the the price will have to rise to get it out of peoples' hands.

 

Mining supply in 2010 was 200 (or was it 180?) million ounces short of demand. A swing of 23 million oz does not fill the gap which continues to be met by old silver scrap. Please understand I am talking about above ground refined available silver. This does not include unrefined silver, silver waiting to be recycled, or silver sitting in someone's home as sterlingware, coins, or jewelry. It is strictly what is available on the market, and that is what I am saying is the lowest in 700 years. This means not only that demand exceeds supply, but that it has continually been the case to the extent that the amount available is roughly half a year's worth of mining supply. This raises the question, how can something be valued for decades at a price level where supply never meets demand?

 

I don't believe that the numbers published make sense in light of the price increase since 2002. I also doubt that all of the countries that mine silver report it, or that all of the industrial users publish how many ounces they use in documents available to the SI, particularly for the industrial users outside of the US and Europe.

 

As I said, there is no argument SHORT Term. I am talking LONG term, and LONG Term, you do not need the price to rise, to get it out of people's hands, you just dig more. It only costs $20 an oz to dig it up.

As far as you statement being true, the proof is not there. Sure, I have read what you have read, but the first thing is you mis-represented what it said. When, I read it, it said what BU's post said. Bullion Equivalent. You left out the equivalent. What exactly does the mean? Maybe it means the number of grams available per person, at the time, maybe not. The fact is we don't know what is means, but you cannot assume it means the total available ounces was greater 700 years ago. That just flies in the face of logic.

Secondly, just because someone says it, does not make it true. Just as we were chatting about the Silver Institutes numbers, must be looked at with at critical eye, so should your claim. I have really only seen folks like Ted Butler state those kinds of stats with no proof at all. Pure logic would suggest those claims are indeed false. These folks also always seem to have another agenda also. They are either bullion dealers, or selling newsletters, or something. I have NEVER seen that claim from an unbiased source, if you have please prove me wrong.

I mean it is comical that BU provided a link on what you are saying, and the name of the site was rumormillnews.com. That is not a site I would go to for investment advice, of course YMMV

 

One aspect that is often not mentioned, is that as prices go up, industrial users of silver seek alternatives that are more cost effective, even if less efficient. Thus at some financial point, demand is being forced lower by price pressure.

 

One only has to look at the price of silver over the last 10 years to understand that demand is high, The real question - in my mind - is what is the source of this demand? There are some who believe that the majority of this demand is being pushed by the investment community, governments expanding reserves and other sources which in reality are only increasing refined raw silver inventories. The data published by the Silver Institute supports this position.

 

The SI would have people believe that if more silver is being produced than consumed with the balance going into increased inventories, that this would put upward pressure on prices. Everyone has to decide for themselves whether or not this makes sense.