The Phaserl


Silver Market Set Up For Much Higher Price Move Than Gold

by Steve St. Angelo, SRSRocco Report:

When the paper markets finally collapse, the silver market is set up for much higher price gains than gold. Why? Because the fundamentals show that precious metals investment demand has put a great deal more pressure on the silver supply than gold… and by a long shot.

There are three crucial reasons why the silver price will outperform the gold price when the highly inflated paper markets disintegrate under the weight of massive debt and derivatives. While many precious metals investors are frustrated by the ability of the Fed and Central Banks to continue to prop up the markets, the longer they postpone the day of reckoning, the worse the collapse.

The first reason I wrote about in my article, Critically High U.S. Silver Supply Reliance In Jeopardy When Paper Markets Crack:

the United States silver net import reliance as a percentage of total consumption, was 72%, versus 36% for copper and a negative 48% for gold.

This chart shows that the U.S. relied upon 72% of its domestic silver demand from foreign sources in 2015. Thus, U.S. silver supply reliance (72%) is double that of copper (36%), while U.S. gold demand enjoyed a 48% surplus versus its domestic supply.

The second reason the silver price will surge higher than the gold price is due to the amount of physical silver, in total ounces, purchased by investors versus gold:

From 2010 to 2016, investors purchased a total of 1,505 million oz (Moz) of silver bar and coin compared to only 284 Moz of physical gold. Thus, precious metals investors purchased five times more silver ounces, than gold ounces during this seven year time period.

Of course, the total value of physical gold investment was much higher than silver during this time period, but this tremendous amount of silver bar and coin demand has impacted the silver market much greater than the gold market.

This brings me to the third reason. Due to the huge amount of silver bar and coin demand since 2010, the silver market suffered a net deficit of 801 Moz. However, the 284 Moz of gold bar and coin demand did not impact the gold market the same way. According to the World Gold Council, the gold market enjoyed a small 7.5 Moz net surplus during this time period:

While it is true that World Gold Council may be underestimating Chinese physical gold demand, and its impact on the annual surplus of deficit figures, a 7.5 Moz surplus is only 3% of the 284 Moz total gold bar and coin demand figure 2010-2016. However, the 801 Moz net silver deficit is more than 50% of total silver bar and coin demand during that same time period.

Which means, physical silver investment demand is causing much more stress on the silver market than it is on gold. While the silver market has been able to supplement the annual deficits with old silver coin stocks or large bars that were liquidated during the 1990’s, this is not an endless supply.

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