Thursday, June 1, 2017

Silver demand in 2016 was greater than supply as production output declined for first time since 2002

For those individuals who have been fretting over why silver prices have been depressed for so long, the answer is not because of oversupply.  In fact, for the first time in 14 years silver production declined in 2016, and demand for the metal was actually higher than supplies.

No the primary reason that silver has not soared higher despite the fact that it is both an industrial metal as well as a monetary metal, is because of the vast manipulation in the futures and derivatives markets which are used by the banks to protect sovereign currencies from being exposed by the metals.

Last week, the Silver Institute and the research team from GFMS at Thomson Reuters said that silver mine production declined in 2016 for the first time since 2002.  The gap between supply and demand also turned negative with 1,007.1 million ounces of supply and 1,027.8 million ounces of demand, creating a 20.7 million-ounce deficit, which puts upward pressure on silver prices.  The largest five silver producers, in order, last year were Mexico, Peru, China, Chile and Russia.  On the demand side, industrial fabrication made up over half (55%) of the demand – 562 million ounces. Jewelry was a distant second at 207 million ounces (20%), while coins and bars accounted for another 206.8 million ounces (20%).  The final 52 million ounces (5%) of demand came primarily from silverware and other decorative uses. 
Unlike gold, silver is an industrial metal as well as a precious and decorative metal, so the new industrial applications for silver provide the biggest boost in the demand curve.  Last year, for instance, demand for silver in photovoltaic applications rose 34% to over 76 million ounces, driven mostly by a 49% increase in solar panel installations last year.  At one time, investors feared what would happen to silver when the photographic process no longer demanded so much silver, but technology always moves forward, not backward, so these new industrial applications of silver have taken the place of photographic demand. - Townhall


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