Thursday, May 15, 2014

Physical Silver Demand Reaches New Record in 2013 As The Paper Price Falls

The Silver Institute released their 2013 report this week showing that global demand for physical silver reached a new record high last year. A large percentage of this demand came from India (not discussed in the summary), which imported close to 25% of the entire annual supply.

Total supply in 2013 (mine production, government sales, scrap and hedging) came to 978 million ounces. The demand side (jewelry, coins and bars, silverware and industrial use) totaled 1.018 billion ounces. This led to a 113 million ounce deficit on the year. 2012 experienced a 66 million ounce deficit. 

While the paper price of silver continues to be beaten down, the fundamentals in the physical market improve every month. As new industrial uses for the metal continue to be put into effect around the world, new supply will be delayed as most producers have a total cost to mine of $20 an ounce or more.

A large part of silver's mining production comes as a byproduct of copper mining, which will continue to see new production delays as prices have declined in the copper market as well.

I believe that silver is the most undervalued asset on the planet right now, and I have been accumulating steadily for the last 12 months. If prices remain in the current range or (hopefully) move lower this accumulation will continue. It is import to remember that an asset being undervalued does not mean that prices will immediately begin to rise. The physical silver market is a tiny spec of dust in relation to the oceans of paper financial assets around the world, and the large players have the ability to do almost whatever they want with the paper price in the short term.

Fortunately for those looking to accumulate physical metal, the paper price is providing an opportunity to do so at a tremendous discount. I made a purchase in another asset class last week. For more on that see:

Opportunity In The Uranium Sector

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