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  • Silver Surplus or Shortage?

    I've been lurking at iTulip for a long time. This is my first post and if there's a more appropriate forum for it, Mods please move it:

    I came across these two articles yesterday which seem to contradict each other. One is predicting a silver surplus while the other predicts a shortage. They both seem right, so what factors are missing from their analysis? Thinking of silver as insurance from POOM, or as a long-term investment, I'd like to know which to believe.

    http://www.mineweb.net/mineweb/view/...2562&sn=Detail
    CPM forecasts big silver surplus this year

    In their latest silver yearbook, precious metals consultants CPM project that investors may be net buyers of 182 million ounces of silver on a bet basis this year.
    Author: Dorothy Kosich
    Posted: Wednesday , 29 Apr 2009

    RENO, NV -
    In their annual yearbook, New York precious metals consulting firm CPM Group forecasts that the net surplus in silver is expected to rise to 182.1 million ounces this year, which will approach the record 222.2 million ounces of silver purchased in 1980.

    In the Silver Yearbook 2009, CPM estimated that total silver supply increased 2.3% to 803.2 million ounces last year, and forecast that total silver supply will increase 2.5% to 823.1 million ounces this year, primarily due to increased mine production and secondary recovery from silver scrap.

    Noting that mine production accounts for 70% of total silver supply, CPM projects that mine production may increase 3.2% this year to 566.3 million ounces. CPM advises that the total gross annual mining capacity of expansions and new mines due over the next couple of years will add at least 118.5 million ounces of annual silver production. "More projects should be expected to be advanced in the future, adding to this total."

    Silver from scrap rose 4.7% in 2008 to 254.5 million ounces, CPM said, anticipating a 0.9% increase to 256.8 million ounces from scrap in 2009.
    However, fabrication demand for silver declined to 701.2 million ounces last year, down 3.1% from 2007. "A large part of the decline in fabrication demand last year was attributed to the deepening global economic conditions coupled with relatively high silver prices," CPM noted.

    "Demand may decline even more sharply" this year as CPM forecast an 8.6% drop to around 641 million ounces this year. The precious metals consultants also advise that jewelry demand could fall from 261 million ounces last year to 249.9 million ounces of silver this year. Industrial demand could drop to 383.7 million in 2009 from 430.3 million ounces in 2008.

    CPM's analysis also found that the key driver for silver prices "is investor attitudes toward silver and how those attitudes are being reflected in investor buying and selling of this metal. Over the past couple of years investors have significantly increased their silver holdings and this has been reflected in relatively high silver prices. It is expected that investors will continue to be interested in buying silver through 2009."

    In their report, CPM notes that "shifts in the nature of investment management, changes in the nature of investment management, changes in the methods for investing in precious metals, and other trends all suggest that investors may continue to buy large volumes of precious metals for several years to come, seeking to maintain their safe haven investments even when economic recovery emerges."

    To obtain a copy of the report, go to www.cpmgroup.com
    ------------------------------------

    Then there's this:

    http://www.stockhouse.com/Columnists...er--Got-Gold-R

    Largest silver players positioning for tight supplies
    4/27/2009 2:40:58 PM | Gene Arensberg

    Excerpt:
    "When the silver LCNS:TO is under 30% like it was in the last COT report and the COMEX commercial traders are at historically low net short levels; when the gold:silver ratio is still closer to 70 than it is to 50 (or lower); when we have been witness to company after company announcing production cutbacks or outright closures meaning much less silver will be produced ahead; when the largest silver ETF has to name (and is late in naming) a new custodian because they have run out of storage space and the silver to put in it (and thatís from the largest possible custodian there is); when premiums for anything and everything silver are sky-high on the Street and some products are just plain scarce to boot and when the contango for COMEX futures has a razor-thin, six-cent difference between the near active May contract and the December contract, we have to have a fully bullish, buy-on-weakness bias for silver metal, silver futures and ETFs.

    We simply cannot find anything of substance that argues with our thesis that the smartest and largest silver traders on earth are positioning as though they believe a sure-enough physical shortage of silver metal is developing, or about to surface."

    Be kinder than necessary because everyone you meet is fighting some kind of battle.

  • #2
    Re: Silver Surplus or Shortage?

    Firstly - welcome.

    Secondly - I'm not sure anybody can answer your question definatively. You may also want to add this to your silver reading ...

    http://seekingalpha.com/article/1342...r?source=yahoo

    Here's what I think I know. I've been buying precious metals for about 12 years now. Gold has done very well for the last 7 or 8 years. Silver is sometimes known as the "metal that disappoints". So what I say. I still buy about 50oz of silver for every oz of gold. Why? Silver has many industrial uses and stockpiles have been shrinking for years. Some estimates say that we may run out of silver in 15-20 years.

    I don't "bet the farm" on my precious metals - but since I have a lot of "fiat currency" I consider it a good hedge. From memory ... I think there is about 4 times more gold above ground than silver. While gold has more "monetary" characteristics - I still think of silver as the "fifth currency".

    All currencies will probably be in a race to the bottom soon. Inflation is coming. I sleep well at night knowing I have substantial holdings in the "4th and 5th currencies". ;)

    Comment


    • #3
      Re: Silver Surplus or Shortage?

      "You may also want to add this to your silver reading ...
      http://seekingalpha.com/article/1342...r?source=yahoo "

      That's an interesting article. It talks about decreasing industrial demand causing less silver to be mined, but the mining article to which I linked indicates increasing mine production combined with declining industrial demand causing a surplus.

      I guess the question is whether investor demand will absorb any production surplus and cause a shortage. If not, everybody waiting for the price of silver to take off might be waiting a long time.

      Be kinder than necessary because everyone you meet is fighting some kind of battle.

      Comment


      • #4
        Re: Silver Surplus or Shortage?

        Originally posted by shiny! View Post

        That's an interesting article. It talks about decreasing industrial demand causing less silver to be mined, but the mining article to which I linked indicates increasing mine production combined with declining industrial demand causing a surplus.
        The increased mining production of silver may pale in comparison to the production of fiat in the years to come.

        The question is: Do you believe that the destruction of credit will induce stagnation? Or perhaps that the governments response will create inflation?

        If you believe in the later (even both at the same time), don't worry about increased mining production because the demand for silver caused by inflation will more than offset the increased production.

        Remember also that in the event of inflation, production costs for silver will also increase.

        Comment


        • #5
          Re: Silver Surplus or Shortage?

          With utmost respect LargoWinch - all of this stuff has been said before - over and over and over again. How many times have all these points been made in the last six months? 50? 100? 500? On these web pages? Sometimes it gets to feeling a bit like a Canasta club. All the regulars meet every Wednesday and Saturday, and while playing Canasta they all share the same remarks they shared the week before, with all the apparently spontaneous freshness and interest as though none of those comments had ever been made before.

          Comment


          • #6
            Re: Silver Surplus or Shortage?

            Why would you invest in silver when you could lock up your money in this "High Yield CD" for a year?



            "Guaranteed, predicable return." That they can change at any time for any reason or no reason. Gotta love it.

            Comment


            • #7
              Re: Silver Surplus or Shortage?

              Originally posted by Lukester View Post
              With utmost respect LargoWinch - all of this stuff has been said before - over and over and over again. How many times have all these points been made in the last six months? 50? 100? 500? On these web pages? Sometimes it gets to feeling a bit like a Canasta club. All the regulars meet every Wednesday and Saturday, and while playing Canasta they all share the same remarks they shared the week before, with all the apparently spontaneous freshness and interest as though none of those comments had ever been made before.
              Fair enough Luke.

              Is the goal is to maintain "spontaneous freshness and interest"? Then perhaps iTulip's "free" area is ill advised and should reconsidered?

              As such, the "open to all Canasta Club" should definitively be eliminated and replaced by the Executive Only Club.

              A few recent examples of Canasta Club do come to mind (not offense intended to the thread instigators):

              http://www.itulip.com/forums/showthread.php?t=9633

              http://www.itulip.com/forums/showthread.php?t=9445

              http://www.itulip.com/forums/showthread.php?t=9636

              http://www.itulip.com/forums/showthread.php?t=9662

              http://www.itulip.com/forums/showthread.php?t=9693

              .....

              That was only in page 1 and 2 of the latest "news" thread, but there are a lot more as you are certainly aware.

              Although, I cannot help but to be confused about your comments regarding my particular reply for the thread at hand, I do not deny the veracity of your remarks.

              I am however disappointed that I am singled out to help illustrate an obvious issue with having free and open forums, which undeniably lead to the resurgence of common investment topics discussed at length within these pages.

              Comment


              • #8
                Re: Silver Surplus or Shortage?

                I appreciate LargoWinch's reply. I didn't mean to start a flame war on my first post. I was hoping for comments to shed some light upon the seemingly contradictory points and conclusions of those two specific articles. If this subject has been "done to death", then I apologize. I have searched iTulip and done quite a bit of reading, and didn't find too much discussion about silver production numbers.

                Be kinder than necessary because everyone you meet is fighting some kind of battle.

                Comment


                • #9
                  Re: Silver Surplus or Shortage?

                  LargoWinch. You are a wonderful guy and a real sport. Not singling you out at all. Lots of various "Canasta Clubs" here chattering and recycling the same topics all year long. BTW, may I inquire if you are you French Canadian or Anglo Canadian? (or I don't know, how many other types of Canadians they got?). I must know this. :cool:


                  Originally posted by LargoWinch View Post
                  Fair enough Luke.

                  Is the goal is to maintain "spontaneous freshness and interest"? Then perhaps iTulip's "free" area is ill advised and should reconsidered?

                  As such, the "open to all Canasta Club" should definitively be eliminated and replaced by the Executive Only Club.

                  A few recent examples of Canasta Club do come to mind (not offense intended to the thread instigators):

                  http://www.itulip.com/forums/showthread.php?t=9633

                  http://www.itulip.com/forums/showthread.php?t=9445

                  http://www.itulip.com/forums/showthread.php?t=9636

                  http://www.itulip.com/forums/showthread.php?t=9662

                  http://www.itulip.com/forums/showthread.php?t=9693

                  .....

                  That was only in page 1 and 2 of the latest "news" thread, but there are a lot more as you are certainly aware.

                  Although, I cannot help but to be confused about your comments regarding my particular reply for the thread at hand, I do not deny the veracity of your remarks.

                  I am however disappointed that I am singled out to help illustrate an obvious issue with having free and open forums, which undeniably lead to the resurgence of common investment topics discussed at length within these pages.
                  Last edited by Contemptuous; 05-01-09, 02:03 AM.

                  Comment


                  • #10
                    Re: Silver Surplus or Shortage?

                    On behalf of one reader Shiny, thanks for your post. Regardless of whether this has been done before, or not, the world's circumstances change daily and reviewing and re-reviewing this subject is important to me and I believe also to many of the Silver and Gold holders that frequent this site.

                    Comment


                    • #11
                      Re: Silver Surplus or Shortage?

                      Originally posted by shiny! View Post
                      "You may also want to add this to your silver reading ...
                      http://seekingalpha.com/article/1342...r?source=yahoo "

                      That's an interesting article. It talks about decreasing industrial demand causing less silver to be mined, but the mining article to which I linked indicates increasing mine production combined with declining industrial demand causing a surplus.

                      I guess the question is whether investor demand will absorb any production surplus and cause a shortage. If not, everybody waiting for the price of silver to take off might be waiting a long time.
                      I couldn't access the article for some reason but I think the source of confusion may be the type of mining that produces silver.
                      Zinc mining, which I assume is declining because of industrial output fall off, is responsible for about 30% of silver production.
                      Copper mining, also falling off, is another 30 % of silver production.
                      So, while more dedicated silver mines may be coming on line, the overall production output could be decreasing.
                      Silver mining being about 30 % of silver production with gold mining making up the remaining 10% or so.

                      I hope I'm not being repetitive but that could explain the confusion.

                      Comment


                      • #12
                        Re: Silver Surplus or Shortage?

                        I'm not sure I buy the claims about the "natural" ratio of silver to gold. Given that most silver is produced as a byproduct of base metal mining, and a lot of base metals that are widely used now were unheard of a few centuries ago (e.g. nickel), this has likely put a fair bit of silver on the market that wouldn't have been worthwhile to pursue in its own right. Also, the rise of digital photography has eliminated one of the biggest industrial uses for the stuff.

                        In spite of the above, though, I'm moderately bullish on silver. In the short run, the economic downturn is likely to mean a lot less base metal mining, and thus a lot less silver entering the market. And there are still plenty of industrial uses, as noted elsewhere, and it remains a decent inflation hedge. Which is a good thing, because it's the only PM investment I have (though that's more because of affordability than anything).

                        Comment


                        • #13
                          Re: Silver Surplus or Shortage?

                          Originally posted by Lukester View Post
                          LargoWinch. You are a wonderful guy and a real sport. Not singling you out at all. Lots of various "Canasta Clubs" here chattering and recycling the same topics all year long. BTW, may I inquire if you are you French Canadian or Anglo Canadian? (or I don't know, how many other types of Canadians they got?). I must know this. :cool:
                          Certainly Luke, I am French Canadian, but have been living in Toronto for the past 10 years. I know of only one other iTulip member from the Belle Province.

                          In case you are wondering; French Canadians represent about 7.5 million of Canada's population of 33.3 million, half of which lives in the Montreal region (one could also say that French Canadians represent half of Florida's population but only during winter time. ;)). In Toronto, there are less than 100K French Canadians in the city, compared to over 750K Canadians of Chinese descent.


                          Now back to our previous exchange, please excuse my tone; you are also real good sport.


                          Last edited by LargoWinch; 05-01-09, 09:35 PM. Reason: PMs

                          Comment


                          • #14
                            Re: Silver Surplus or Shortage?

                            Originally posted by shiny! View Post
                            I appreciate LargoWinch's reply. I didn't mean to start a flame war on my first post. I was hoping for comments to shed some light upon the seemingly contradictory points and conclusions of those two specific articles. If this subject has been "done to death", then I apologize. I have searched iTulip and done quite a bit of reading, and didn't find too much discussion about silver production numbers.
                            Hi shiny!. For what it's worth, my view is that new people come to iTulip all the time, and even most of the regulars haven't the stamina to read everything that's posted, so it is unavoidable that similar topics keep coming up. Further, philosophically, I don't think it's reasonable to expect readers to use the Search function to dig back through old posts to find answers to their questions. First of all, that's not a conversation that they are participating in, and secondly, the search function can return A LOT of stuff to wade through. Hell, I only ever use the Search function if I know exactly what I'm looking for (i.e. an old post I want to quote), and even then it takes some time. Therefore, it's both unavoidable and reasonable that people will post questions that have "been done to death"; hopefully, the response from the community will be to post links to prior threads that discuss the topic, or an executive summary that rehashes the major points. The folks who do that -- who respond helpfully to a question, even though it has already been talked over elsewhere -- are actually providing a nice service that helps engage new community members. Ideally, those who are sick of the topic will move on to something else more interesting.

                            Comment


                            • #15
                              Re: Silver Surplus or Shortage?

                              Originally posted by LargoWinch View Post
                              I cannot help to think about the fact that contributions from valued members such as Jim N. and GrapeJelly have been sorely missed lately.
                              Yes. Where is that Grapejelly? I see him logged in but he rarely posts any more. Lots of pithy comments from Grapejelly over the past couple of years. BTW I have been in correspondence with your French Canadian "other half" here, Nicolasd. He's the guy that (he claims, inadvertently) invited a prospective new employer to a strip club for a job interview.

                              Comment

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