Silver in Surplus? No Such Thing
Source: Roland Watson, Seeking Alpha (1/29/08)
The truth is that supply and demand are in near perfect balance. If more silver comes to market in the absence of new buyers the price is bid down. If less comes in the absence of new sellers, it is bid up.
The main item I want to address is the statement in that document that the silver market was in surplus in 2007 by 6,141 tonnes or over 197 million ounces. That is a lot of silver; in fact it constitutes about 18% of their estimated mine and scrap supply for 2007. Does this seem a lot of silver to you? It certainly did to me!
Subsequent to that report being published, I received emails from fellow silver investors asking "Is this bad for silver?” My answer is "No" and I will give two reasons for that.
Firstly, there is no such thing as a silver surplus. In the days when the US Government used to hold billions of ounces of silver in stockpile, we could say "Yes". But now with even the US government tapped out of silver and having to purchase on the open markets, silver is no longer drip fed or dumped onto the markets by big holders as of old...
The truth is that supply and demand are in near perfect balance. If more silver comes to market in the absence of new buyers the price is bid down. If less comes in the absence of new sellers, it is bid up. Mines do not overproduce silver as a primary or secondary product; they just sell it on to the market at the best price. If they do store it, it is done in the most efficient way and that is by not mining it out of the ground. In the case of silver produced as a by-product, it is just put on the market for the best bid. It is not stored away in giant ore heaps waiting for a better price - it is just sold!...