Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Silver Production Plunges by 20%

Commodities / Gold and Silver 2015 Dec 21, 2015 - 11:32 AM GMT

By: Jason_Hamlin

Commodities

To view The U.S. Geological Survey (USGS) released their September silver production numbers this week and the results were incredible. Only 82.6 metric tons (mt) of silver were produced domestically in September versus 103 tons during September of last year. This represents a massive decline of 20% and is part of a greater trend of declining silver supply.


As you can see from the chart below, 2015 silver production started the year higher than 2014. But in the spring, things started to shift. Production dropped 4% in March and has been declining ever since for six straight months. This trend of falling silver production culminated with the sharpest decline on record during the latest period, down 20%! Indeed, many analysts believe that we may have already seen PEAK SILVER production.

Silver Production Chart Tons

During 2014, production ramped up significantly in the winter months, but this year is shaping up to be quite different. Even if production were to rebound a bit in the coming months, we are still likely to see the gap versus widen comparing this year vs. last year. And if production does not rebound sharply, we are going to see declines of 30% or more in the coming months.

This is a significant development for silver investors, as sharply dropping supply and steady demand is a clear recipe for higher prices. Remember, sales of American Silver Eagles are on pace to set a new record for the third year in a row. Total sales through the end of November stand at 44.7 million ounces passing last year’s record of 44.0 million ounces.

Silver demand has also been hot in Canada, with the most recent quarterly silver sales on pace to break 2014’s record. Silver sales increased 76% year over year from 5.4 million to 9.5 million ounces. Year to date through the third quarter of 2015, the Royal Canadian Mint has sold 25.2 million ounces of silver, on pace to surpass 2014’s record silver sales.

If we haven’t see the bottom in silver yet, these fundamentals factors suggest that we are close.

While silver miners have reduced their costs in recent years, many are still unprofitable at current silver prices. There aren’t many things that you can buy for less than the cost to produce it. There simply wouldn’t be anyone making the product anymore and silver is no different. These conditions can persist in the short-term, particularly with the leverage paper markets having such a large impact on pricing. However, I don’t believe that the silver price can remain below the average cost of production for long. Eventually the fundamentals force prices back to correct equilibrium given the supply and demand in the marketplace.

I have long anticipated that as a growing number of miners would suspend operations, pushing silver supplies down sharply. We are finally seeing this manifest with the latest monthly production data. It holds true for primary silver miners, but also for base metals producers where silver is a by-product. They are also facing plunging prices in industrial metals and are having a hard time remaining profitable. As they are forced to suspend or shutter operations, silver production is going to fall even lower.

The decline in silver supply is not going to be a short-term phenomenon. Not only is current production impacted as miners shut down operations, but future production is also impacted as exploration budgets are slashed. Even if the silver price were to double in 2016 and miners increased cash flows, it would still take a few years to increase exploration back to previous levels and have the type of production pipeline needed to sustain production levels. Anyway that you slice it, the industry is likely to face declining silver production for years to come.

I am not convinced that we have seen the absolute low in silver prices quite yet. But this type of data is encouraging for silver investors and suggests that the bottom may be near. Rather than attempting to time the exact bottom, I think it makes sense to begin purchasing in tranches around current levels. This is true of physical silver, but also the severely undervalued silver mining stocks that could offer leverage of 3X to 5X during the next upleg.

And although the FED finally pulled the trigger and raised rates by 25 basis points this week, there is plenty of evidence to suggest that silver (and gold) prices can climb higher along with interest rates. There is also the distinct possibility that the FED will not be able to continue raising rates beyond a token amount and will need to reverse course at some point in 2016. So, I do not believe that precious metals investors should fear increases rates.

If you would like to get an insider perspective on our thinking about the markets, view our model portfolio, receive trade alerts and get the monthly newsletter, you can get sign up by clicking here. The price is less than $1 per day and you can try it out for 30-day risk free! In addition to gold and silver stocks, we also cover energy, agriculture, and methods to short the market and hedge your portfolio.

HAPPY HOLIDAYS DISCOUNT: New subscribers can take 50% off the quarterly subscription price using the coupon code “SANTA15” (offer expires December 31, 2015)

By Jason Hamlin

http://www.goldstockbull.com/

Jason Hamlin is the founder of Gold Stock Bull and publishes a monthly contrarian newsletter that contains in-depth research into the markets with a focus on finding undervalued gold and silver mining companies. The Premium Membership includes the newsletter, real-time access to the model portfolio and email trade alerts whenever Jason is buying or selling. Click here for instant access!

Copyright © 2015 Gold Stock Bull - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in