Silver Surplus?


"Billions of ounces don't disappear in a surplus, only in a deficit."

The $2+ rally in silver prices off recent lows resulted from paper trading on the COMEX between the commercials and speculators—not any notable developments in the real world of supply and demand. Simply put, the short term price moves are still COMEX-generated.

The release of the Silver Institute's Annual World Survey has resulted in a rash of stories suggesting a large surplus of silver. According to the story, if not for record investment demand, the price of silver would have declined because of the surplus.

In the mid-1980s, the idea of a silver surplus was widely accepted as responsible for the low price. In private reports, I wrote this was bogus, and that the only surplus was in paper short positions by the big commercials on the COMEX—same as now.

With the benefit of hindsight, it is clear there was no silver surplus back then. We have much less silver bullion above ground today than we had back then, to the tune of billions of ounces. Billions of ounces don't disappear in a surplus, only in a deficit.

According to the survey, the 2008 mine production number was 680.9 million ounces. To my knowledge, this is the largest amount of silver ever mined in history, a notable achievement.

According to the survey, the world fabricated 151.7 million more ounces of silver than it mined. As it has for more than 70 years, the world fabricated more silver than it mined.

After using all the silver that was mined, the 152 million ounces that were fabricated above and beyond mine production came from other sources of supply, including 176.6 million ounces of recycled silver scrap and net government sales of 30.9 million ounces.

The amount of silver coming out of the ground and through recycling is spoken for by fabrication and that's not about to change. The amount of silver remaining in existing inventories and available for investment purchase is limited and not about to change. The number of investors who will come to learn the silver story, however, must change and their buying will tilt the equation against the manipulators. As more people the real silver story, they will buy. Phony stories about surpluses won't prevent that.

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