Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Russia Buys 300,000 Ounces Of Gold In March – Nears 2,000 Tons In Gold Reserves - 24th Apr 18
Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - 24th Apr 18
CRYPTOCURRENCY MASTERCLASS #CRY90 - 24th Apr 18
UKGC Set to Make Online Gambling Industry More Risk-Free - 24th Apr 18
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Peak Gold and Silver - It’s Here!

Commodities / Gold and Silver 2016 Jan 22, 2016 - 04:56 PM GMT

By: MoneyMetals

Commodities

Have we reached peak precious metals? Many analysts think so.

Just to be clear, however, the idea of peak gold and peak silver doesn’t refer to a peak prices. The precious metals put in a cyclical price high in 2011. But annual mining production levels may have peaked in 2014-2015. This is what is meant by “peak precious metals.”


There is good reason to believe that newly mined supplies of gold and silver will decline in 2016 and beyond. The main culprit is low prices. In 2015, gold and silver prices spent most of the year trading below miners’ all-in production costs (which average $17/oz for silver and $1,150/oz for gold).

Primary silver production is already on the decline in the major producing countries. Last year silver output fell in Chile by 4.6%, in the United States by 6.5%, and in Canada by more than 20%!

What Scalebacks in Copper Mining Mean for Silver

It’s important to keep in mind that the majority of silver that is mined comes as a byproduct of mining operations for other metals. Fully 55% of all silver produced comes from copper, lead, and zinc mining. Another 13% comes as a byproduct of gold mining.

In order to understand the supply dynamics of the silver market, you have to take a look at what’s happening with base metals mining...

Much like gold miners, copper producers are struggling to cope with low spot prices. One of the ways they are trying to survive is by cutting production. Nine of the largest copper producers announced they would cut output by 200,000 metric tons in the first quarter of 2016.

The contraction in the base metals mining industry will contribute to supply tightness in silver. The silver market has experienced an annual supply deficit for most of this decade. That deficit could widen in 2016 and beyond.

The Silver Institute notes, “While such deficits do not necessarily influence prices in the near term, multiple years of annual deficits can begin to apply upward pressure to prices in subsequent periods.”

Drilling Down on the Demand Outlook

Industrial demand for gold and silver may turn out to be tepid for 2016. This is less of a factor in gold markets than for silver, where manufacturers require a good portion of what is produced annually.

Some economists worry about the possibility of recession in the months ahead. Any slump will weigh on demand for items such as jewelry and other goods. However, a lot of industrial demand comes from high-growth sectors, which have proven resilient during past recessions. Electronic, solar, and healthcare-related applications for silver come to mind.

It would be a big mistake to analyze silver demand as if silver were just another industrial metal.

It’s true that industrial applications remain the biggest single component of silver demand. But unlike with zinc, nickel, iron, and other industrial metals, silver is also sought after by investors as a precious metal and a form of money. Demand for silver coins, rounds, and bars has grown steadily in recent years, accounting for 19.5% of the total silver market in 2015, according to the Silver Institute.

U.S. and Canadian Silver Production Can No Longer Satisfy Coin Demand

Surging investment demand for physical bullion was perhaps the biggest story in precious metals for 2015. Mints and refiners spent much of the 2nd half of the year unable to keep up. Investors had to contend with higher premiums and delivery delays.

Steve St. Angelo of the SRSrocco Report put out a striking analysis showing how U.S. and Canadian silver coin demand has now eclipsed silver production from the two countries. That would have been unthinkable a few years ago.

He notes that “in 2001 U.S. and Canadian silver production totaled 96.6 million oz (Moz)... That year, Silver Eagle and Maple Leaf sales totaled 9.2 Moz.” A net surplus of 87.4 million ounces.

Fast forward 14 years, and we have a “net deficit of 26.2 Moz in 2015 as total Silver Eagle and Maple Leaf sales reach a record 75 Moz versus combined mine supply of 48.8 Moz.”

That means investment demand is single-handedly outstripping supply.

It’s indicative of a broader trend. According to a 2016 forecast for precious metals markets issued by Commerzbank, “rising physical demand will meet with falling supply.” That is surely a formula for higher prices – eventually.

When Will Physical Realities Override Paper Machinations?

In the long-term, physical supply and demand is everything. But in the short-term to intermediate-term, the fundamentals are almost meaningless. Big institutional futures markets traders can move markets in any direction for any reason... until, at some point, they no longer can.

Leverage recently surged to record levels in the paper-traded gold and silver markets. Physical inventories of silver on the Comex fell from 184 million ounces in July 2015 to 158 million by the end of the year. A run-on-the-bank scenario becomes a very real possibility if just a tiny proportion of futures contract holders stand for delivery of physical metal.

Holders of physical metal would be wise to hang on tight to it and keep a long-term perspective. At some point – perhaps soon – the major price trend will turn back in favor of the bulls as the bullish supply and demand fundamentals on the physical side overwhelm the paper

By Stefan Gleason

MoneyMetals.com

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2016 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 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

6 Critical Money Making Rules