5 CHARTS: The Real Story Behind Silver

GFMS SILVER Coin ChartAs the world continues down the road of self-destruction via its highly leveraged paper financial markets, there’s a much more fascinating story worth looking at. 
Hidden from the majority of the public and misunderstood by the so-called professional metal analysts, is the Real Story Behind Silver.

buff sale
From the SRSRocco Report:

The real problem today as I have mentioned several times before, there’s only a few good analysts out there…. and a whole bunch of losers.  Unfortunately, the investing public has no idea that it is being misled due to this increasingly lousy shortsighted analysis.

Thomson Reuters GFMS put out a new Silver Update last month that was already covered by BrotherJohnF’s website last week (which many have already seen).  However, I took some time to closely examine the presentation and found some interesting charts worth explaining.

The first chart below has to do with the change in Silver Bullion Coin Sales.  According the GFMS, they show an approximate 43 million oz in silver coins sold in North America in the first 9 months of the year.

GFMS SILVER Coin Chart

They don’t give you the exact figures, so we have to just eyeball the red bars and estimate what the amount would be by the scale on the left.  I came up with the following:

2013 Q1 = 14 million oz

2013 Q2 = 15 million oz

2013 Q3 = 14 million oz

Total = 43 million oz

So, GFMS figures that 43 million oz of North American Silver Bullion Coins have been sold in the Q1-Q3 period.  Now, according to my figures obtained from the U.S. & Royal Canadian Mint, total sales for the Silver Eagle & Maples were 55.7 million oz during this time period.  I don’t know why there is a discrepancy here, but it turns out to nearly 13 million less than the figures put out by the two Official North American Mints.

Furthermore, this does not include the “Other Commemorative” silver coins that these two mints also produce and sell.  This can be seen more accurately in the next chart:

GFMS World Fabrication Demand COINS

Here GFMS is forecasting an approximate 17.5 million oz increase in fabrication of silver coins in 2013 over 2012.  If we estimate that there will be 43 million oz of Silver Eagles and 25 million oz of Silver Maples sold in the entire year, the total would be 67 million oz in 2013.

Now, if we compare this to the total Silver Maples & Eagles sold in 2012…. it was 52 million.  So, the estimated change in sales from just these two North American coins will be about 15 million oz.  In addition, this does not include the gain from the other Official Mints as well as misc. silver coins that are produced and sold by the U.S. & Royal Canadian Mint.

As stated in the chart above, the North American mints produced and sold nearly 6 million oz of these misc silver bullion coins in 2012.  I believe the change in Silver Bullion coins in 2013 over 2012 will be more like 25-30 million oz.

I tried to contact Andrew Leyland, the Thomson Reuters GFMS analyst who wrote the report, but I was told that they do not give out contact information of their analysts.  Instead, one of their associates asked if they could assist me, so I sent a reply that hopefully will be forwarded to Mr. Leyland.  If I get a response about these dependencies, I will update it in this article.

This next chart says it all.  If Jeff Christian can’t see the Fed & Central Bank precious metal manipulation at work, the figures below certainly paint a clear picture:

GFMS Base Metal & Gold-Silver Price 2013

Since the beginning of the year, silver has lost 29% of its value while gold is down 22%.  Of course the base metals are behaving much better as copper is only down 12%, lead down 10% and zinc a modest 9%.  The data for this chart was calculated using prices before Nov 12th.

If we do a quick update including the Central Bank’s phat finger during Monday’s precious metals’ raid, Gold is now down 27% and silver, a whopping 38%.  Interestingly, copper is now only down 13% which makes the year to date difference between copper and silver nearly 3 times the rate.

Of course there’s no manipulation taking place  …..”nothing to see here so let’s just move on”, as Jeff Christian would say.

This next chart has to be one of my favorites.  I still receive emails from readers and investors who believe that it cost $9 to produce an ounce of silver.  For some strange reason, the industry continues to promote the insane methodology of “CASH COSTS.”

GFMS Cash Cost Chart

Mr. Leyland is trying to show the difference between the Top Primary Silver cash cost and silver price today is still pretty healthy at $17 an ounce, even though it fell from a record $27 in 2011.  If we take this data at face value, the silver miners are making a huge $17 cash cost profit…. or are they?

I would like to remind the reader that “Cash Costs” are not a GAAP – Generally Accepted Accounting Principle.  Basically, cash costs are figured by subtracting the company’s by-product metal from its production costs.  So, the higher percentage of by-product revenue a company has, the lower the cash cost.  So what?

For example, Hecla Mining recorded a $7.40 cash cost per ounce in Q3 2013 from their Lucky Friday and Greens Creek mines, but at the same time suffered an $8.4 million net income loss during the period.  Again, cash costs do not determine the profitability of a mining company.

Hopefully at some point in time, the industry can step away from focusing on this totally meaningless accounting metric and throw it away in the trash bin where it belongs.

The last chart puts into perspective the totally out-of-whack market of silver investment.  Here we can see that total global silver investment is forecasted to fall to a little more than $6 billion in 2013 down from $8 billion in 2012:

GFMS Global Silver Investment 2013

The reason why the Silver Market is so small, is because the Fed & Central Banks want it that way.  $6 billion dollars invested in the silver market in 2013 is $6 billion too much for the monetary authorities.

This is apparent if we go back in time and read what President Lyndon Johnson said about silver when he signed the “Coinage Act of 1965″ — the act that removed silver from U.S. coins:

Now, all of you know these changes are necessary for a very simple reason–silver is a scarce material. Our uses of silver are growing as our population and our economy grows. The hard fact is that silver consumption is now more than double new silver production each year. So, in the face of this worldwide shortage of silver, and our rapidly growing need for coins, the only really prudent course was to reduce our dependence upon silver for making our coins.

If anybody has any idea of hoarding our silver coins, let me say this. Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin. There will be no profit in holding them out of circulation for the value of their silver content.

Basically, Johnson was saying that silver’s role as a monetary was over now that it had an increasing role as an industrial metal.  You will notice that Johnson warned the “Hoarders” that the U.S. Treasury had the ability to keep the price of silver in line with our present silver coin.

Of course that doesn’t imply “manipulation”… does it?  Naw…just a standard policy of the U.S. Government.

In addition, Johnson stated the following remarks as well:

Some have asked whether our silver coins will disappear. The answer is very definitely-no.

Our present silver coins won’t disappear and they won’t even become rarities. We estimate that there are now 12 billion–I repeat, more than 12 billion silver dimes and quarters and half dollars that are now outstanding. We will make another billion before we halt production. And they will be used side-by-side with our new coins.

Since the life of a silver coin is about 25 years, we expect our traditional silver coins to be with us in large numbers for a long, long time.

FULL ARTICLE HERE

Maples Sale(2)

Johnson remarked that the real silver coins would not “disappear”, but indeed they did.  Within just a few years, it was difficult to find hardly any silver coins in circulation.  As we all know the famous Gresham’s Law …. Bad Money Drives Out Good.

As I mentioned in the chart above, the $6 billion of global silver investment is peanuts if we compare it to the $85 billion a month of Fed QE monetization as well as the $90 trillion in Global Conventional Assets under management.

The Real Story Behind Silver will spread as the world realizes the majority of its paper assets held will become increasingly worthless in the future.  Today, the markets are running on fumes coming from the ink off of the Central Banks printing press.

While this all seems quite normal to the majority of people today…. I guarantee it won’t be the day the U.S. Dollar and Treasury Market finally dry up and blow away.

Comments

  1. One picture is worth a thousand charts, and here is the trend so far today…
     

    • Mam, You had better double check that!

    • whoa   that made me dizzy mammoth
        i thought it was an eyechart
       
      Ranger I was not trying to be snotty to you re your comments from last night when you said you were really feeling great.
      I though it was sarcasm.   it sounded more like what I would say after a couple of scotches and a $5 ounce bounce in silver prices
      after all the bad news MOPE flowing out way, feeling good is nice.
       

    • Yeah, I was disoriented for a second and had to whip the roller ball quickly down to prevent me falling off my chair LOL.

  2. So essentially this continues the overtly provable narrative that mining industry mouthpieces, mining executives, and mining analysts seemingly paint distorted, intellectually dishonest pictures about the state of affairs?
     
    The question is becoming more and more obvious, who pays their salary?

    • When TBTF acquire the whole lot of them by proxy and consolidate them into nicely branded corporate mouthpieces they will even start bad mouthing their own product is my guess.
       
      In a game of Rock-Scissors-Paper, Paper beats Rock, so perhaps it was predictable that a Paper printing press would eventually conquer those who dig the Rock for metal? …I say the printers will fail and the Chinese Scissors will take over… SNIP, SNIP.

  3. You ROCK Steve!

  4. Well, I think I speak honestly for most here, and certainly for myself when I say, as LONG as I can convert fiat into PM bullion (at any volume) I will continue to accept fiat. The day bullion becomes so sparsely available that exchanges are limited in quantity per day or month, or just not available, I will work for PMs only, and not accept paper. So far, I exchange any gross amount of paper, so I’m happy. Not expectedcting to become filthy rich (tho that would be nice) just don’t plan on being completely wiped out! Survival first, pleasure later.

  5. As long as there are Crayolas and Big Chief Tablets, Charts will be made.

    • @Ranger , don’t forget the Etcha-Sketch!
      And yes I checked and today’s trend was up.
      No idea about tomorrow’s trend, though.  My tea leaves all sank to the bottom of the cup so I can’t read them.

    • Damn Mammoth… I think you’ve hit on the PERFECT EXPLANATION for the waterfall crashes in the gold and silver prices… it’s those Etch-a-Sketch charting systems… do you remember how hard it is to make a diagonal line on one of those things??   Verticals are SO much easier!!!!

    • Thats my line… charts *yawn* :-)

  6. Short-squeeze is name for the game today.
     
    LOL

  7. That’s a lot of OZ’s sold this year. Hear that? 56 million oz’s = approx 1600 tons, now that’s a load of my mind. Lol  Keep Stacking.
    Thanks, Steve

  8. Silver will break $17.76 before it can go up past $60.

  9. Frankly, I’m sorta happy to get a second chance at these lower prices again…  in the desperation of the capitulation stage of this market, it’s all too easy to forget that, if you think holding PM’s is risky, think about all those dollar-denominated paper assets most people are holding in prayer right now…  does ANYONE here really think that being in the financial paper markets is a safe place going forward?

    • Safe?  No.  Risky as hell.  But I still have some fiat invested.  This will work until it does not.  Wise investors will have multiple bases covered.

  10. Excellent stuff Steve!!
    Do except European demand for silver bullion to fall right about NOW.
    Germany have been THE conduit for silver due to their friendly 7% VAT fee on legal tender silver. Privately minted bullion and regular bars are near extinct here. They are traded, but go from hand to hand mostly. Only used for tax-free storage paper silvver type scheme. No-one buys new Degussa bars, just a few stupids like myself 2 years ago. 
    Anyway, the “cheap” 7% VAT silver ENDS. It will become nigh impossible, are latest expectations, to obtain silver of any kind at less than 19% VAT. Someone may find a lookhole, but the EU is very determined to put maximum restrictions on silver. Gold is being left out FOR NOW. 
    Unlike the US/CA situation, buying across a state border doesn’t exempt you from VAT over here. You pay the VAT of the country you bought at. And all countries’ bullion dealers bought in Germany, as to not have to add local VAT of the whole amount, just their margin (5% or so? effectively 1% extra VAT).
    The EU market for silver may however be more transparent, due to the utter lack off regular bars and private mintage. All that it is sold, is legal tender. And those figures should be easy enough to pull up. Maple Leafs do have a significant share, as do the Perth Mint products. Some Eagles. Then countries such as Ruanda, Somalia, Andorra, Armenia, Cook Islands, etc, etc. Most minted in Germany. And no real need to get permission of these countries anymore after 1st January, there is not VAT (consumer price) edge to be gotten anymore. Might as well come up with a pretty design and mint it. Save yourself the bribe of an African warlord.

  11. Total global investment demand for silver is $6 billion, that is still very weak demand for the whole globe.   We need to see at least $10-20 billion per year,  then higher prices follow.

    • Yeah, here is more weak demand  evidence for you zman. One has to wonder how you even look in the mirror everyday after trolling this board and spewing endless amounts of propaganda and general dogshit.

      http://www.zerohedge.com/news/2013-12-04/gold-smuggling-increases-7x-india-and-surpasses-illegal-drug-trade

    • @zman
      Presumably it only seems weak at $20. What if silver is actually worth $1000.
      Ie – it’s the ounces that matter not the price. Surely you need to look at the available stocks against the purchases to get an idea of the demand?
      Slightly different story don’t you think?
      JC

    • The current discussion is about global investment in silver, which is only $6 billion for the year.  Think about it, this is for the whole global economy, that is nothing. 
      Why people would think that is a strong flow of money into a sector makes no sense to me.
      This is good news, it means if $50-100 billions flows into the market one year, the price will go higher.
      When will big amounts of money come into the silver market?   Heavy inflation.
       

  12. If you take the roughly 2.5 Billion ounces above ground in human hands, investment, stackers and commodity uses, worth $20 an ounce, thats still not big bucks.  800 million ounces a year production is worth $16,000,000,000.   This is chicken feed but to us and others it is an interesting amount   The thinness of this market could also see sharp movements due to desireability of this metal if $50 billion or more, then the price could be jump a bit.

    • I dunno, AG.  Maybe I just impress a lot easier than you but… $50,000,000,000 extra dollars added to my bank account would sure as hell impress me!  ;-)
       
      Yeah, I get that this in on a world scale where the needle doesn’t move much until trillions are discussed.  The part that I find interesting is that those of us who believe that in a free market silver would be a LOT higher in price than it is now can look at the current market and extrapolate that entire market upwards for $100, $200, etc. silver.  Hmmm… let’s see… 800,000,000 ounces at $250 an oz. is… $200B?  Ah, that’s better.  :-)

  13. that’s what I was thinking to Ed   One of my ‘best of’ posts from last year noted that people spend more on pet food in a year than the entire silver annual production of any recent year.   If silver went to $100, we see $80 billion a year world wide.  That is a pinch less than our  monthly QE.
    If just a bit of interest rotated to silver, in a concentrated way, with a little fear and frantic-ness,  like 1980 when silver went from $16 to $50 in just 35 days, that might be a decent price arrival. 
    That is one thing I recall from that short time in the 5 year silver run when silver went crazy and so did gold. Gold and silver dropped by 50% before this parabolic rise. I think that drop was about 2 years before the big jump.  Ranger says 2 years.  I tend to agree but don’t know exactly why, or what might produce a major change prior to that.  The crystal ball is murky.
       I would not mind at all to sell a part of my stack into a rally that might be $50 to $100. At $50 that 50% higher than my average price.  I’d buy some more preps and maybe trade into gold.
      There will be ups and down and with the intel we get from the silver analysts,  our local population of highly informed people, and the pay per view types that know how to read the tea leaves, we might actually know when to sell at an optimal time, buy other things of interest, and then maybe rotated back into silver when the price drops. 
    There are lots of things that we can say about silver but one thing for sure—it is a nasty devilishly volatile metal.  That  V can be played for the buyers and sellers who wear the trader hat for a  while.  I’d be a player in that market, even if it was no more than  of my stack.  At $100 an ounce I’d sell some  ounces and pay off my mortgage, the one counterparty risk that is bothering me at this time.
    I should have paid it off instead of buying more silver, but heck, I thought the price would jump and I’d sell and pay off the damn thing.  But now its just a waiting game.
    Not that it’s too costly and the interest in deductible but it may be the one thing that I would call a mistake, made early last.  year. 

  14. So it seems all the ‘official’ figures in the bullion coin world are about as cooked as the jobs numbers … who would have thunken? Nice research SD.

  15. I have thought (for years) that the KEY to silver price increasing significantly would be when the sheeple (some of the 250 million out there) would start to stack silver.  Since at the present time, maybe 1% of us are actively stacking, it would seem to be a no-brainer that this event would spark the rise in price–irrespective of what the cabal does–.   Well, I think I was/am wrong!!! The only way the price is going to go up is if it goes to ZERO first!

  16. Well up at 3am as I can’t sleep and getting ready to fly out of Bangor, Maine airport at 7am and heading for Calif. for my daughters wedding. I’m all a twitter as I haven’t seen my daughters in a few years. Keep Stacking
     
     
     

  17. CHeers Charlie  Congratulations and have a great time.  Weddings are one of the happiest events we will every experience

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