Where are the Anti-Silver Stories?

Anti-gold stories flood the media.

Where are the Anti-Silver Stories?

Anti-gold hysteria reaches nadir with “Pet Rock” labels and price predictions of $350 an ounce.

Yet, Silver has fallen more than gold, and media coverage is limited.

JM Bullion

Gold Bashing Goes Mainstream-Why Not Silver Bashing?

Everyday for a month or so the airwaves and digital journals have been filled with anti-gold stories. In reporting on surging gold sales at the U.S. Mint in July we noted:

Lately, everyone is an authority on gold, especially its price. We are treated daily to an incessant barrage of lower gold price predictions.

The bulk of the lower gold price predictions are based on the “everything is awesome” narrative that reached its nadir yesterday with a “Gold is Doomed” collection of words strewn together and assembled in the Washington Post. “Gold is Doomed” contains a pronouncement that our policy makersknow what they are doing.”, a few mentions of Paul Krugman and the obligatory “gold doesn’t pay interest or dividends” insight.

No mention is made, however, that gold doesn’t default or go bankrupt either.


It took a while but here come the anti-silver stories:

Update August 5, 2015 Wall Street Journal: This Precious Metal Needs a Silver Bullet

Update August 25, 2015 Bloomberg: How Silver Wrecked China

The Tiny Silver Market

Over looked in the rush to print ever lower gold predictions, is silver, gold’s precious metals cousin that trades closer to the price of base metals than gold. While the price of gold has fallen in recent years, silver has fallen further. Yet, you’d have to do a google long tail search to find a story predicting the demise of silver.

Why the lack of silver coverage?

In May, we noted that the value of global silver mining production was worth about $13.9 billion. Silver industrial demand for use in electronics, solar panel fabrication and other applications makes up over 50% of overall demand (the remaining demand comes from investment and jewelry).

Silver demand is satisfied in large part from annual silver mining supply.

Industrial demand for gold, in contrast, is about 10% and most gold demand is satisfied from existing stockpiles as gold is recycled, whereas the vast majority of industrial silver used in items like electronics, is cast away.

We have updated the chart below to reflect 2014 silver mining production data and the lower “napalmed” silver price.

chart showing value of silver mining production vs jp morgan fines

The value of silver mining production in 2014 was just $13.1 billion.* Twitter has a market capitalization of over $21 billion.

*based on 877.5 million ounces of silver mined and a price of $15 an ounce.

Why the lack of silver coverage?

COMEX Trading of Silver

COMEX is a futures market in which contracts supposedly representing commodities like gold and silver are traded. Gold and silver contracts trade on COMEX in amounts that massively exceed what is physically available for delivery.

This does not deter the largest traders on COMEX (long and short) all of whom are bullion banks specializing in this type of trading.

Think of COMEX as like professional wrestling where the participants know its fake but play along anyway because there is money to be made, manipulation to be accomplished; not gold and silver to be bought and sold and delivery taken.

COMEX is a place where bullion banks trade gold and silver they don’t have to bullion banks who buy gold and silver they don’t want.

Here are examples of the amounts of “silver” that are traded on COMEX:

Short Positions of Traders vs. Days of Global Silver Mining Production

cot july 28  2015

As of July 21, 2015, the eight largest traders have sold short silver in amounts that would required 190 days of global silver mining production to cover – silver they obviously don’t have.

Long Positions of Traders vs. Days of Global Silver Mining Production

long trader positions on comex for gold and silver july 2015

As of July 21, 2015, the eight largest traders were long silver in amounts that would require almost 110 days of global silver mining production- silver they will never take delivery on.

Why the lack of silver coverage?

Shanghai Gold Exchange Deliveries vs. COMEX Deliveries

The trading in precious metals on COMEX does not represent actual trades of physical metal but contracts to buy and sell physical metal well in excess of the available amount to deliver. Delivery rarely occurs.

The Shanghai Gold Exchange, in contrast, is a physical market, where a trader can’t “sell” gold unless he has it.

Comex vs the shanghai gold exchange chart

More gold was physically delivered on the Shanghai Gold Exchange during the two weeks ended July 17, 2015 than was delivered on COMEX in 2014.

Many commentators predict a day when a long silver trader will “stand for delivery” and cause a COMEX default. There is little chance of this happening. COMEX is not a place where people go to “buy” silver or gold; it is a place to get exposure to their prices.

If indeed such a white knight silver trader were to demand delivery on one of his contracts in excess of amounts that could be delivered, COMEX has ways of dealing with such a situation. See “Silver Thursday – The Day The Hunt Brothers Went Bust.”

You can’t beat the casino at the casino.

A failure to deliver event is more likely to occur in the real life silver market where silver is required for industry.

Why the lack of silver coverage?

Gold is Desired/Silver Required

No one needs gold. People want gold. They want it for jewlery or as a financial asset. Unlike commodities such as oil that are required on a daily basis, gold purchases can be postponed. Part of silver demand is also comprised of jewerly and investment needs that can be postponed.

Industrial silver demand, however, cannot be postponed without significant interruption to production and profits. A silver shortage would cause significant harm to electronics and solar panel manufacuturers.

If physical silver investment demand were to draw enough silver away from industrial producers, such an industrial silver shortage could occur.

There is a difference, however, between a silver mint production delay due to increased demand and a shortage. In the former case, the mint can’t keep up with production, in the latter there is little or no silver from which to drawn upon to mint coins, rounds or bars. The increased silver investment demand may be a pre-cursor to a silver shortage but would have to continue for many months before it overwhelmed available silver supply.

In the event of a real silver shortage – due to a combined increased in physical demand and decrease in current silver mining output, mints, jewelry makers AND electronics and solar panel manufacturers wouldn’t be able to get the silver they need to continue operations.

That is when the paper silver COMEX futures trading charade gets ignored and manufacturers would pay what they need to pay to get silver.

Only then would you see true supply and demand market dynamic price discovery.

Why the lack of silver coverage?

Surging Record U.S. Mint Sales

U.S. Mint sales of American Silver Eagles destroyed a twenty-eight year old July record even though sales were suspended for two weeks and the month is not yet over.

july american silver eagle sales 1987-2015 chart

July sales of American Silver Eagle coins are over 5.3 million – an all time July record.

U.S. Mint record American Silver Eagle sales have gone virtually unremarked outside the alternative media.

Why the lack of silver coverage?

Here is a potential explanation:

Any signficant investment interest in physical silver could easily overwhelm available supply. Physical demand for silver is surging at a time when the world’s largest silver producers’ mining production is down 12%. In typical main stream media fashion, if a story they don’t like can be attacked, they attack it. If however, they don’t like a story and find it difficult to attack, they ignore it and hope it goes away.

Bash Away!

So go ahead gold bashers: Try your hands at some anti-silver stories, projecting lower prices. But just don’t mention the tiny size of the silver market, vital uses of silver, surging silver sales, declining silver production, the gold silver ratio or anything else that might draw attention to this undervalued metal.

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Further Reading:

Silver Coin Demand In the United States: a Historic Perspective

How Much is a Year of Silver Mining Production Worth

Gold Suppy and Demand

Silver Supply and Demand

Smaulgld Silver Buying Guide

Smaulgld Gold Buying Guide

Gold and Silver Price Manipulation – Suspected

Gold and Silver Manipulation – Actual

The Gold Silver Ratio

The Canadian Mint Sells Record Amounts of one ounce Silver Maple Leaf Coins in 2013 (see page 30 of the report)

Buy Gold and Silver

Austrian Mint Runs Overtime to Meet Demand

2014 Silver and Gold Predictions

The Gold Silver Ratio vs. The Silver to Gold Sales Ratio

The West Sells Paper Gold While the East Buys Physical Gold

The Price of Silver & Real Estate

Buying Physical Gold and Silver

Twelve Ways Silver is Different Than Gold

High Sales of Silver at the U.S., Canadian and Australian Mints in 2013

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