Silver Will Be The King Precious Metal Performer

While gold is the king monetary metal, silver will turn out to be the king precious metal performer.  Currently, gold is stealing the show as the East (China) continues to consume more than total world gold production.
However, silver will surprise the markets in the future as overwhelming demand will outstrip supply in a big way.
The key factor that will drive up the price (value) of silver much higher than gold in percentage terms, will be its affordability.  As the price of gold heads back above $1,500 and silver to $30, an individual can buy a heck of a lot more silver than gold.
As the public and market are lulled back to sleep (presently) on the value of silver, there will come a time in the future when it will be impossible to acquire a single ounceonly at much higher prices.
Silver Will Be The King Precious Metal Performer.

2014 Silver Eagles As Low As $2.69 Over Spot!

 
From the SRSRocco Report:

Mike Maloney discusses this in a recent video, Silver Has More Potential Than Gold.

In the video, Mike said the following as it pertained to President Nixon dropping the Dollar-Gold peg back in 1971:

“All the Central Banks and economists said that gold was going to fall because there was not going to be demand for it as money.  Instead of falling, gold started rise and anyone who said that if was going to $100 was considered a lunatic.  It went to $850 (by 1980).

Once gold got over $400, the public changed their preference to silver.  Silver than rose from 1/50th to 1/15th the value of gold’s value.”

Mike went on to say that during the 1970 decade, gold increased 24 times its value, whereas silver’s jump was 36 times.

A Quick Look At Silver’s 2013 Supply & Demand Balance

According to Thomson Reuters GFMS Nov. 2013 Silver update, this is their estimated silver supply and demand figures:

2013 Silver Supply

Mine Production = 815 million oz

Scrap Supply = 233 million oz

Net Govt Sales = 7 million oz

Total Supply = 1,055 million oz

 

2013 Silver Demand

Industrial Applications = 470 million oz

Jewelry & Silverware = 242 million oz

Photography = 55 million oz

Coins & Medals = 110 million oz

Total Demand = 877 million oz

Here we can see that total supply outstrips demand by 178 million oz.  In 2012, the difference between supply and demand was 201 million oz, but 41.5 million oz of that amount went into “Producer De-Hedging.” All de-hedging means, is a cut from the silver producers hedge book.

GFMS estimates 2013 total silver supply (1,055 mil oz) to rise 7 million oz more than in 2012 (1,048 mil oz).  However, total estimated fabrication demand will increase 30  million oz to 877 million oz from 847 million oz in 2012.

The 2013 surplus silver amount (178 mil oz)  falls into the “Implied Net-Investment” category.  This figure may change somewhat depending on Thomson Reuters GFMS update on the amount of silver “hedging or de-heding.”

Regardless, the 178 million oz surplus does not include any silver investment demand from standard bars and bullion coins that are not in the “Official coin” category — Eagles, Maples, Philharmonics, Pandas and etc.

These supply and demand figures are what the typical orthodox banks and brokerage houses go by in making their forecasts.  While it seems as if the 178 million oz silver surplus in 2013 was a lot, it is still peanuts when presented in a dollar amount:

178 million oz  x  $24 (2013 avg. spot) = $4.2 billion


1 oz Silver Buffalo Rounds As Low As 79 Cents Over Spot at SDBullion!

In my previous article, Watch As Precious Metals & Energy Prices Go Crazy As Things Fall Apart, I included this chart:

U.S. Personal Sector Financial Assets & Total Global Silver ETF's

The $14 billion figure on the left side of the chart represents the current value of all the Global Silver ETFs.  If we add the $4 billion of supposed silver surplus in 2013, it would increase the total to $18 billion — a paltry insignificant figure in the whole scheme of things.

The chart above shows where the U.S. public holds its cash.  Unfortunately, Americans have been conditioned to believe that fiat money is a store of value.  Fiat money is not a store of value, but rather just a paper currency used for trade.

We are witnessing the devaluation of many fiat currencies throughout the world presently.  It is just a matter of time before the U.S. Dollar loses its role as the world’s reserve currency and experiences a 30%+ decline in value.

TECHNICAL ANALYSIS:  Increasingly Worthless in Forecasting Future Price

As I have stated over and over again… technical analysis is worthless in a rigged market.  Furthermore, I want to add another qualifier… technical analysis will become increasing worthless in a peak energy environment.

I believe ENERGY IS THE KEY to understanding where the value of precious metals are heading as well as the overall economy.  Many precious metal analysts are constantly talking about the GREAT MONETARY RESET that’s coming (I agree)… but what happens after that?

Does anyone pay any attention to that train of thought?  What happens once we see say $5,000 gold and $200 silver?  What do you do with you precious metals then?

It all gets back to energy.  Let’s look at what is taking place in the natural gas market.  The price of natural gas shot up to $6.50 briefly before getting knocked down to $4.60 currently.

NatGas Chart $3.50 forecast

Some of the large energy institutions were forecasting a very low price of natural gas for the next several years.  I am republishing this quote from EnergyWire:

Shale gas production doesn’t make a major upward move until 2016, according to EIA.Spot prices for natural gas at the major Louisiana pricing hub will drop to $3.12 per million British thermal units in 2014 and 2015, below this year’s average forecast price of $3.25, according to EIA’s Annual Energy Outlook. Prices don’t pick up until 2016 either, in the EIA assessment.

Actually, the EIA (U.S. Energy Information Agency) was forecasting an even lower price than $3.50 for 2014 and 2015.  Furthermore, Charles Nenner who worked at Goldman Sachs and now has his own forecasting service, made an even worse prediction.

You may have heard Charles Nenner or his associate, David Gurwitz being interviewed on GoldSeek and Financial Sense recently.  David Gurwitz spoke with Jim Puplava on Financial Sense on Oct, 13th, 2013 about Nenner’s forecasts for gold, silver and various commodities.

In Gurwitz’s interview, he stated the following about natural gas:

“Charles Nenner called a top in natural gas in the high $3′s.  He sees it going down to $2.50, and then lower after that.  It doesn’t show great economic demand.”

I paraphrased what he said just a bit, but that was the basic forecast for natural gas coming from Nenner Research.  If we look at the natural gas chart above, the price did not continue to fall towards $2.50, but instead spiked higher to $6.50.

Nenner and Gurwitz do not follow supply and demand fundamentals, rather they look at math and cycles.  While I have a great deal of respect for analysts who are able to see price trends through cycles, I believe this sort of analysis becomes increasingly worthless in a peak energy environment.

The reason the price of natural gas spiked over the past several months had EVERYTHING to do with supply and demand forces.  The table below details U.S. natural gas withdrawals and underground storage levels.

 Year of the Horse Bars & Rounds As Low As 89 Cents Over Spot at SDBullion!

 

Natural Gas Storage table 22714

(Bcf = billion cubic feet)

Total natural gas withdrawals for the most recent report were 95 Bcf, which pushed the underground gas storage level down to 1,348 Bcf.. 40% lower than the same period last year.  There are still five weeks (on average) of net gas withdrawals remaining.

The next chart shows how low the gas storage levels are, compared to the 5-year average:

Natural Gas Storage 22714

The extreme cold winter in the Midwest and Northeast had a lot to do with the huge draw-down of underground gas supplies as well as the recent price spikes.  However, this isn’t something Nenner and technical traders go by when they make their future price forecasts.

What happens if the U.S. does peak in natural gas production in 2014 or 2015?  I am not saying it will (chances are becoming more likely), but this is not taken into consideration by the technical Chartists.

Keep an eye on the price of natural gas in March.  If we continue to see large weekly withdrawals of underground gas supplies, the price will head back over $5.  So much for technical analysis and prices below $2.50.

Silver Will Be The King Precious Metal Performer

As the public and market are lulled back to sleep (presently) on the value of silver, there will come a time in the future when it will be impossible to acquire a single ounce… only at much higher prices.

I presented the 2013 silver supply and demand balance figures to show just how little there was in a “Dollar Surplus.”  When the Fed purchased over $1 trillion in U.S. Treasuries and MBS – Mortgaged Backed Securities in 2013, the hidden value of silver increased substantially… even though the paper price did not reflect it.

The price or value of silver will move up much higher in percentage terms compared to gold in the future due to its affordability to the masses.  Technical analysis will be worthless in forecasting this meteoric rise –just as Charles Nenner’s technical analysis failed to see the rise in the price of natural gas in 2014.

Precious metal investor need to stop paying attention to these orthodox silver supply and demand forecasts as they will become irrelevant in the future as global peak oil production destroys the biggest Fiat Monetary Ponzi Scheme in history.

The 1 oz Silver Incuse Indian is Available Now at SDBullion!

 

Please check back for updates at the SRSrocco Report and my new REPORTS PAGE in March.  You can also follow us at twitter below:

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Comments

  1. There is no doubt in my mind that the future generation will enjoy the rise of Gold and Silver, but it ain’t happnin’ in this one.



  2. Silver already IS the king…………..the majority of the world just does not know it yet but that does not diminish it’s nobility.

    • India snorkeled up 197,000,000 of silver in 2013   China ditto.   that’s half the world production and between them they are taking down over 100% of world gold production.   

  3. Gold, silver, platinum, palladium, rhodium, copper, take your pick, they are all equally good. Gold is the odd man out though, because as far as I am concerned, its money. The others are industrial metals.

  4. “In 2012, the difference between supply and demand was 201 million oz (extra supply)”
    “Here we can see that total supply (2013) outstrips demand by 172 million oz”
    “Regardless, the 178 million surplus does not include any silver investment demand for standard bars and bullion coins that are not in the “official coin” category”
    Well, this clearly demostrates that there is plenty of silver available for the investment world,  and why silver trades at $20 oz today, it’s simple supply and demand at work.

    • Except that physical supply/demand has at best an inverse effect on COMEX prices, if any.
      I am disappointed that the bullion business can’t get proper insight into physical sales. How hard it is to tally up the Buffalo’s, other rounds, and likely forgotten European mintage, plus bars? Every dealer you speak to says silver is in great demand. And they’re not seling ONLY the stupid Eagles. Especially not in the OTHER 96% of the world…

  5. The demand figures quoted by Thomson Reuters do they provide more detail of how much of the 110 million to coins and metals goes to SE, dealers and to the ETF’s?

  6. Gotta love that term “peak energy”.  Hell, my energy PEAKED years ago!  ;-)
     
    So, what energy source was peaking before petroleum and nat gas were discovered as potential energy sources?  Whale oil?  Wood? When fusion power becomes commercially viable, no one will care about nasty stinky dirty petroleum any more.  Yes, it will take time and resources to develop but it will happen.
     

    • Ed_B

      Correct-a-mundo, Ed! There are a few pretty fascinating candidates, like Hydrogen Fuel Cells and Methane-Ice, to say nothing of the thousands of ‘Tesla-Tinkerers’ doggedly hacking away at tapping into ambient geological elecro-magnetic current.

      Still, ‘Necessity is the Mother of Invention’, so Steve’s position will likely have to take (calamitous) effect before one of those alternatives gets ‘out of the box’.

  7. Edb  they have a pill for that.  just sayin’

  8. Excerpt: “What happens once we see say $5,000 gold and $200 silver?  What do you do with you precious metals then?”

    My anticipation is to trade directly for goods. In the alternative, I want to take care that it goes into the savings of younger folks. It’s a kind of ‘generational cycliicality’ reasoning to my mind … or more poetically, the ‘Breath of Society’.

  9. Is it just my exceedingly uber-sensitive Sock Puppet meter, or has this particular article brought out every single PM suppressive agent provocateur lurking on the site?

  10. Sick of this tub thumping nonsense, when silver finally (if ever) reaches a Gazzilion pounds to one wombat, wake me up, otherwise….I remain…..waiting…..

  11. Science is in support that silver has a big role to play in ending this debt enslavement by the few who rule over us by forcing us into debt by using our own greed of gain,  bearing in mind this is a shadow of the spiritual bondage we are in, we must not judge those who rule over us, as it is GOD who directs mans steps, and ultimately we collectively are GODS soul and therefore bound to eachother.    
     
    Oligarch meaning ~ {Greek} oligarkhēs, from oligoi  = few  arkhein =  to rule
    Oligodynamic meaning ~ {Greek} oligos = few dynamis = force
     
    The oligodynamic effect 
     
    The exact mechanism of this action is still
    unknown but some data suggest that the metal ions
    denature protein of the target cells by binding to
    reactive groups resulting in their precipitation and
    inactivation. The high affinity of cellular proteins for
    the metallic ions results in the death of the cells due to
    cumulative effects of the ion within the cells (Benson
    2002). Similarly, silver inactivates enzymes by binding
    Nepal Journal of Science and Technology 10 (2009) 189-193
    189
    with sulfhydryl groups to form silver sulfides or
    sulfhydryl-binding propensity of silver ion disrupts cell
    membranes, disables proteins and inhibits enzyme
    activities (Thurman & Gerba 1988; Semikina & Skulacher
    1990). The study also suggest that positively charged
    copper ion distorts the cell wall by bonding to negatively
    charged groups and allowing the silver ion into the cell
    (Hambidge 2001). Silver ions bind to DNA, RNA,
    enzymes and cellular proteins causing cell damage and
    death (Hambidge 2001)
     
    As you can see silver/money will bring about the desolation of both host and parasite, which is in the order of things

  12. @Good&Evil,
    Here in the South we are good natured, easy going.  You can ask for bout anything and you will receive.  When it comes to force ….. demanding (dynamis) … well, that is entirely different.  We do not take too kindly to those words, particularly being ‘told’ or ruled.  Matter of fact, many Patriots all over the country are weary of the oligar attitude. 

  13. IMHO   Petroleum can be manipulated with paper or bullets. Putin understands this.  Russia is a petro oligarchy.
     When oil and gas prices go upward at an increasing rate due to the geopolitical events, silver will get a serious boot in the behind.

  14. Who is in control of the financial system the Austrians or the Keynesians?  Although I agree with the Austrian model it is not the system that is in place, therefore any and all upward momentum in the gold/silver markets will be met with resistance.  This is the way it will be for some time I would imagine.  I know there is all this talk of a comex default or whatever but it hasn’t happened.  All the QE3 may at some point may come home to roost and bump the prices up but I wouldn’t hold my breath for some “moon shot” like many have anticipated. That being said we live in volatile times and geopolitical events could cause a shock to the system.  Anything can happen.  If your a precious metals bug you just have to remain patient and steadfast in what you believe.  

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