The situation in the silver market seems to point to the beginning stages of a GLOBAL RUN ON SILVER. I say, “it seems to point to a RUN on silver” due to several indicators I am looking at. This also may force the global silver market to suffer shortages in the future. Why? Well, let’s take a look at these different indicators.
First, ... U.S. silver imports picked up considerably in the first two months of the year. Well, this continued into March as total U.S. silver imports reached a hefty 1,504 metric tons (mt) compared to 1,129 mt during the same period last year:
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U.S. silver imports are 33% higher than the first quarter of 2014. ...
Secondly, India is importing the MOST SILVER EVER. As I mentioned in another article, INDIAN SILVER IMPORTS: On Track To Smash All Records, India imported a massive 3,000 mt in the first four months of the year. If this trend continues, India will import a whopping 9,000 mt in 2015, surpassing its previous record of 7,000 mt in 2014.
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Third, evidence points to a possible tightness in the physical silver market. In Keith Weiner’s recent article, Silver Market Change Report July 5, 2015, he published the following chart on the Silver Cobasis:
Keith stated the following about the new change in the silver cobasis:
…. However, look at that red cobasis line go. It was a mere 7 basis points last Friday. It ended this week at 100 bps. The cobasis of farther-out contracts also rose proportionally.
Suddenly, the silver market is firm.
We can name two reasons why the cobasis might skyrocket. One is that there is a risk. If your counterparty defaults, then you don’t get your metal back. You may get dollars. The exchange will insist the dollars are equivalent to the metal, but that’s small consolation.
We do not believe this is the main problem now, because it’s not occurring in gold. If the banks were in imminent danger, the gold basis would not be quiescent.
The other possible reason is that there’s a growing shortage of silver. Of course, in order to decarry silver, you have to have the metal. If it’s not available, you can just wistfully watch the rising cobasis.
Basically, Keith believes the rising cobasis (in RED) is a result of a tightness in the silver market. He goes on to say this is the present condition, but that could change in the future.
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Fourth, the recent surge in Silver (and Gold) Eagle buying. ...
Fifth, mine supply falling and Government silver sales… ZILCH. As I stated in my article, World’s Largest Silver Producer Down A Stunning 12%, Mexico’s silver production fell precipitously in April compared to the same month last year. ...
... While Peru’s silver production is higher for the year, another large producer is down considerably. Thus, silver production from the top producers in the first 3-4 months of 2015 is down compared to last year. I will do an update on this in a separate article.
One of the most important factors in the SUPPLY-DEMAND situation for silver has to do with Net Government Silver Sales. This chart is from my new report called THE SILVER CHART REPORT. It is listed as Chart #43 of a total of 48 charts in the report. It is a must read for the new and experienced precious metal investor.
As we can see in the chart, net government silver sales were the highest in 2003 at 88.7 Moz. Net government silver sales accounted for 15% of total mine supply in 2003.
During the following years, net government silver sales continued to decline (except for the spike in 2010) and in 2014 were a big PHAT ZERO. While Russia, China and India were the main sources of net government silver sales, China was by far the largest supplier in the group.
Now, the KEY FACTOR to understand why China stopped selling its government silver stocks into the market is stated in THE SILVER MARKET REPORT. I have to say, I was quite surprised to read the reason China wanted to hold onto to its remaining government silver stocks. If you want to find out why, you have to read the report.
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