While gold is a main focus of the Central Bank market rigging apparatus, physical silver investment demand is their real enemy. The reason is simple. Central Banks have gold in their vaults to dump on the market (or to lease) to control the price, but they have very little if any silver for this purpose.
We must remember, Gold and Silver go hand in hand. If one is controlled, so must the other. If the price of silver got out of hand and skyrocketed higher, for whatever reason, it would impact the price of gold as well.
Which is why we continue to read and hear about “Industrial silver demand” from the typical banks and top industry sources. I have stated several times, industrial silver demand is a NON ISSUE. It’s a RED HERRING. It’s a DEAD END. However, this doesn’t stop these banks and official sources from continuing to put out reports on future industrial demand as an indicator of price going forward.
Now, I did see one report on silver investment demand by our very own Silver Prophet, Jeff Christian and the CPM Group last year. CPM Group put out a nice 50 page report on silver investment demand for the Silver Institute stating the following:
The report, entitled “Silver Investment Demand,” suggests that investors may accumulate as much as one billion additional ounces of silver in various investment instruments over the next decade. This is on top of the more than 860 million ounces of silver purchased as an investment since 2006.
I have to give the CPM Group credit for finally putting out a report on silver investment demand, but their figures are a TAD BIT LOW. According to Thomson Reuters GFMS 2014 Silver Interim Report, total silver bar and coin demand since 2006 came in at a whopping 1.3 billion ounces. Seems as if the CPM Group somehow misplaced nearly 500 million ounces (Moz) of physical silver investment demand.
Furthermore, the CPM Group states that world silver investment demand may grow by an additional one billion ounces over the next decade. Well, this is a shocking revelation as the world invested in 652 Moz of silver (physical bar-coin & ETFs) in just the last three years.
Now, unless the Fed and Central Bank’s monetary and debt problems are going to disappear into thin air over the next few years, I don’t see global silver investment demand declining all that much over the next decade. On the other hand, I rather see a tremendous increase on the horizon as the Central Banks lose control over the biggest Ponzi Scheme in history.
Investors, Hedge Funds or Sovereign Wealth Funds looking for strategic information on the silver market need to stop wasting their time with “Industrial Silver Demand.” I just read the wonderful report by LBMA’s Philip Newman titled, “The Outlook For Silver Industrial Demand.”
Here were the major points of the report:
Silver industrial demand has gone through a difficult period in recent years. The 2008 global recession and subsequent sluggish economic recovery have impacted end-use demand in a number of key industrial sectors. In addition, high and volatile silver prices have incentivised manufacturers to thrift on the use of silver in a range of applications. While the economic impact on industrial offtake is cyclical in nature, thrifting in practice is rarely reversed and effectively results in demand destruction.
In this article, however, we make the case for why silver industrial offtake appears to have turned the corner in 2013.
Basically, the report says the high silver price in 2011 resulted in the industry thrifting of silver — using less metal. However, the report stated that “industrial offtake appears to have turned the corner in 2013.”
Well, if we go by the data put out by the Thomson Reuters GFMS 2014 Silver Interim Report, industrial silver fabrication fell from 580 Moz in 2013 to 577 Moz in 2014. I don’t see a turnaround here.
Furthermore, there still seems to be a lot of HYPE about Solar PV silver demand to go banana’s in the future. Again, this is another DEAD END. Here is a chart on photovoltaic silver demand from the GFMS 2014 Silver Market Report:
While Solar PV silver demand may increase a bit going forward due to falling Chinese solar panel inventories, I don’t see this as much of a factor in determining the price of silver going forward.
So, what do I believe will impact the price of silver over the next several years and decade? Physical silver investment demand. If we look at the chart below, we can see two significant trends taking place:
You will notice that industrial silver fabrication continues to fall (shown in these three-year time periods), while physical silver investment demand doubled since the 2006-2008 period. From 2006-2008, total world physical silver investment demand was only 14% of industrial fabrication, but increased significantly to 33% in the 2012-2014 time period.
This chart should provide investors and fund managers who control more money than they have sense, that PHYSICAL SILVER INVESTMENT DEMAND is the key in determining price in the future, not industrial fabrication. In addition, GLOBAL PEAK OIL will also be a factor that will destroy any attempt by the industry to grow its silver fabrication demand as World GDP will turn south heading into the toilet.
Regrettably, most large investors and Hedge Funds will be the last to realize the ramifications of peak oil as they continue to acquire worthless assets such as Real Estate. Real Estate will become one of the WORST physical assets to own in a peak oil environment.
The Central Bankers cannot rig the price of gold without controlling the silver market. This is why we see pathetic attempts by member banks to downplay the value of gold and silver. SocGen just put out this lovely article titled, “SocGen’s ultra bearish gold and silver outlook” stating:
They thus expected the bear market in gold to continue further and saw the price as falling to average only $925 an ounce between 2016 and 2019.
The report suggested that the U.S. Fed would raise interest rates by 25 basis points as early as June, and then sees it raising rates more aggressively in 2016 and peaking at a 4% rate by 2017, with the gold price continuing to fall as interest rates rise.
The SocGen analysts give silver pretty short shrift too. The analysts see the silver price trending downwards to around $14/ounce by the end of the current year and with the metal price slipping further, down to around $13 by 2019
What a complete surprise. A Bank that makes profits by selling worthless derivatives and other assorted paper garbage (as well assists in the propping up of the French Govt), believes gold will reach $925 and silver $13 by 2019. This has to be some of the finest PROPAGANDA by an institution that is by all measure, BANKRUPT…LOL.
The Fed and Western Central Banks are in serious trouble. The only thing holding up their entire Fiat Paper Ponzi Scheme is FAITH that their citizens will continue to believe that PAPER or DIGITS are wealth. Once the global peak of unconventional oil production occurs (circa 2015/2016), their official policy of printing money and increasing debt will no longer work.
Thus, investors who have their HEADS SCREWED ON CORRECTLY, will get out of paper and into physical assets such as gold and silver before the GREAT FINANCIAL ENEMA takes place.
Physical silver bar and coin investment is the biggest threat to Central Bank intervention, because they have very little if any physical silver in their vaults to throw on the market to suppress price.
The only alternatives they have are:
1) Instruct their member banks to naked short the silver market with unlimited paper contracts.
2) Motivate banks and official institutions to provide bearish forecasts for gold and silver.
3) Hope and pray the 98% invested in the largest Ponzi Scheme in history don’t wake up anytime soon.
While these fine tactics are currently working, COMMON SENSE and LOGIC will finally return back to the fundamentals of investing. This should do wonders for silver market dynamics. I would imagine once this occurs total demand for physical silver investment will easily surpass industrial fabrication.
Unfortunately, when the world wakes up to this realization, finding available silver at a reasonable price may become simply impossible.
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