silver fundamentals

  1. 730 Posts.
    Supply and Demand

    Annually, approximately 500 million mined ounces of silver and 220 million ounces from scrap is supplied.

    Total annual fabrication demand, is approximately 870 million ounces.

    Total Supply = 720 Moz
    Total Demand = 870 Moz

    ANNUAL DEFICIT = 150 Moz


    The silver stockpile (depending on which source used) currently stands around 180 million ounces. At its' current March delivery price, it is valued at approximately 1 billion US dollars.

    The stockpile is said to be reducing (through normal industrial and commercial demand) by about 100 million ounces annually, and (through decreased mined silver) by about 70 million ounces anually.

    Speculation the Chinese will continue selling above $5 is only limited to the estimated amount they have left: 30 million ounces (2001 estimate).

    Effectively, and all else being equal, silver stockpiles should be completely eliminated during 2003.

    Investment Demand

    If silver follows gold, or when silver follows gold, investment demand will ensure a substantially higher silver price.

    It is virtually impossible to keep the POS this low when the industrial market needs physical delivery to function. This factor differs somewhat from gold.

    I don't know, and wont claim to know when the squeeze will come, but I do know it will come.

    It will either be some time this year or early next year.

    As gold climbs higher, silver will become a much more attractive proposition to investors and fund managers than it currently is.

    Guess the outcome of what will happen to the POS if only a small fraction of investment income from equities or bonds to silver.


    If silver breaks above and holds $5, the next major point of resistance is at $5.50.

    There appears not to be much resistance from $5.50 to $7.00, and when silver brakes out through $5.50, it usually travels quickly.

    What to Do?

    1. Buy shares in a company that is not overpriced, will mine silver without sovereign risk, is either producing or only months away, and ensure it is not hedged.

    2. Purchase physical product: Perth Mint Matthey Aus Bullion

    3. Buy silver futures or options over futures: NYMEX

    In Summary

    With the trend currently favouring precious metals, and likely to continue in at least the medium, silver has substantial room to move.

    It is near historical lows. There are too many potentially positive factors to rule out further investigation by serious investors.

    I have taken care producing this article, and figures herein are averages of estimates from numerous sources.

    I will at a later date post associated articles and sources of and links to information.

    An Article By Acronym
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