All sorts of anecdotal evidence out there of growing physical silver shortages from Mint shutdowns to unusually heavy Comex deliveries. Today, our pal SRSrooco writes about the drawdowns occurring in Shanghai, too.
by, Steve St. Angelo
There seems to be more evidence indicating the beginning stages of a global run on silver. How so? Well, ever since the middle of June, something significantly changed in the silver market. Physical silver investment demand skyrocketed. Why June? This was at the time Greece was voting on whether or not to remain in the European Union.
Since the middle of June, investment demand for silver has increased considerably. Matter-a-fact, the U.S. Mint suspended sales of the Silver Eagle for two weeks starting on July 12th. When Silver Eagle sales resumed on July 27th, over 2.5 million were sold over the next two days.
Furthermore, the Royal Canadian Mint has put its Gold and Silver Maple Leaf sales on allocation to its Authorized Participants. In addition, India has imported a record 3,824 metric tons (mt) in the first six months of the year. This is up 35% compared to the same time last year. And according to the BankBazzar.com July 28th press release:
Generally, as far as market observation goes, silver imports rise in the second half of the year. The rise in demand in August, is a result of the jewellery making and silverware industry, just before the festive season in Autumn as well as supplying for exports before Christmas.
So, if India imported a record 3,824 mt in the first half of the year, this will only increase in the second half as jewelry and silverware demand pick up considerably due to the festive season in the Autumn.
Another factor in a rise in global silver demand is the recent decline in silver stocks at the Shanghai Futures Exchange. Some of my readers have sent me emails stating, “Whatever happened to the silver stocks at the Shanghai Futures Exchange?” Well, let’s first look at my last update from September, 2014:
Shanghai silver stocks peaked in May of 2013 at 1,143 mt and fell to a low of 81 mt in September of 2014. Since the last update, silver stocks at the Shanghai Futures Exchange (SHFE) continued to slowly build until they reached a peak in the middle of June:
As we can see, SHFE silver warehouse stocks increased from 176 mt at the end of January to a peak of 394 mt on June 15th. However, silver stocks began to decline at the latter part of June, then plummeted in July falling 34% to 261 mt by the beginning of August.
And then we had this from a Money Metals Exchange article, Investment Silver Demand Draining COMEX Vaults:
One or more major players “jumped the queue” and took delivery of about 6.5 million more ounces of silver out of COMEX warehouses than anticipated at the beginning of the month.
The July data should send a shiver down the spine of anyone with a naked short position on silver, i.e. anyone who doesn’t have physical silver to deliver if a counter-party demands it. Short sellers are counting on being able to settle in cash – or grab silver bars from exchange vaults if necessary.
Mints Scouring America for Raw Silver
The big spike in investment coins, rounds, and bars is almost certainly behind the unusual delivery activity at COMEX warehouses.
Our sources indicate mint and refinery demand is largely responsible for this “jumping [of] the queue” and offtake of 1,000-ounce bars. The silver is needed for manufacturing into smaller retail products currently in very short supply.
Some major precious metals depots around the country, such as those in Los Angeles, completely ran out of all forms of pure silver last week, and mint owners are scouring the country to lock up the silver they need to keep production running.
Folks, we have to remember, this huge spike in physical silver demand is still from a fraction of investors. The only folks buying silver are either a few wealthy individuals (some who are finally waking up) and the diehard precious metals investors that make up 1-2% of the total investment market.
What happens when more wealthy individuals, institutions and the masses finally get on board? There just isn’t enough silver if any of these individual classes of investors wanted to purchase physical silver.
Lastly, physical silver investment demand continues to get stronger every year… even as the price declines. Savvy investors realize the Fed and Central Banks haven’t fixed anything so the day of reckoning is still coming. The situation today is is much different than the two and a half decade lull in silver prices after its meteoric rise in 1979.
The Fed and Central Banks had 35 years of rising global oil production to increase paper leverage and debt. Now that the world has plateaued in conventional oil production (U.S. shale oil peaked months ago), the peak and decline will wreak havoc on the world’s highly leverage paper Ponzi Scheme.
Investors better take notice in the huge increase of physical silver investment demand and market shortages as this will likely to only get worse in the future. Better to have your silver now, then wait until it’s nearly impossible to acquire.