As the global stock markets continue to crash, demand for precious metals
will continue to increase. Already, the U.S. Mint had to ration Silver
Eagles sales due to a shortage of silver blanks. Sales of Silver Eagles
in a little more than a week have reached nearly five million oz.
While Silver Eagle sales in January are normally very high compared to the
rest of the year, initial sales this month are starting off with a real
bang. The Authorized Dealers purchased all of the four million oz of
Silver Eagles allocated last week and have already taken delivery of 950,000
of the 1 million oz allotment this week. There are only 50,000 Silver
Eagles remaining until next week’s allotment (Source: CoinNews.net).
As I am writing this article, the Hang Seng stock market closed
down 701 points, the Nikkei is down 518. I would imagine the
U.S. stock indices will be deeply in the red when they open, unless the
magicians at the Fed and U.S. Treasury decide to bring out their bag of
tricks.
Regardless, investors are becoming quite worried about a market that makes
no sense whatsoever. Even though many investors didn’t understand the
fundamental valuations of the market over the past 2-3 years, when the
indices were rising, they held their noses and went along for the ride.
However, now that the U.S. and global markets are in free-fall, things could
get down right ugly in 2016.
Forget The Paper Price Of Silver… Look At The 20 Year Change
While many precious metal investors belly ache about the falling paper price
of gold and silver, demand for the physical metals continues to rise….
especially silver. To get an idea of how much more physical silver
investment is currently taking place, let’s look at the following chart:
In 1996, total Silver Eagle sales for the year were
3,466,000. Now compare that to the 4,950,000 Silver Eagles sold in the
first half of January. We must remember, Silver Eagle sales in
2016 started on January 11th. So, in just six working days (this Monday
was a holiday), the U.S. Mint sold 43% more Silver Eagles than all of 1996.
Furthermore, if we compare sales of Silver Eagles in 1996 versus 2015,
this was the result:
Investors purchased a record 47 million Silver Eagles in 2015 compared to
3.5 million in 1996. Basically, investors bought 13.5 times
more Silver Eagles in 2015 than they did in 1996. Even though
precious metals investors are frustrated by the low paper price of silver,
they fail to realize that horrible fate coming to most paper assets in the
future.
The surge in physical silver investment demand indicates that intelligent
minds realize it’s a rising “High-quality store of value” compared to most
other paper assets trading by mindless computer algorithms.
The Key To Silver Investment: It’s A Matter Of Acquiring
Ounces
The key to investing in silver is focusing on acquiring ounces and not
worrying about its current paper value. The true value of
silver has been masked by the “Massive financialization of Paper Garbage” on
the poor slobs in American and the rest of the world. Now,
when I say slob… I don’t mean to be derogatory. In many ways, I am also
a poor slob when it comes to the Fed’s policies that enrich the 1% while
destroying the middle class.
That being said, investors are acquiring a record amount of physical
silver to try to hedge against the collapse of the Greatest Financial Ponzi
Scheme in history. This next charts compares the 20-year change of
silver investment versus Jewelry and Silverware demand:
In 1996, total global Silver Bar and Coin investment was only 23 million
oz (Moz) versus 264 Moz of Jewelry & Silverware. However, 20 years
later… we see a much different picture. While global Jewelry &
Silverware demand increased to 280 Moz, Silver Bar & Coin investment
surged to 236 Moz.
NOTE: GFMS who publishes the World Silver Surveys,
did provide silver bar demand in early years such as 1996. The figure
of 23 Moz is GFMS Coin & Medal demand. I would imagine silver bar
investment in 1996 was very low due to a lack of interest. Furthermore,
GFMS estimates total Silver Bar & Coin demand for 2015 to be 206 Moz.
I added 30 Moz to the figure due to the fact that private silver rounds and
bars are not apart of the official figures. However, I had an email
exchange with the folks at GFMS and they will be soon adding an annual figure
for private rounds and bars. They estimate that 2015 private round and
bar to be at least 30 Moz due to the huge shortages of official coins from
June-Sept.
Unfortunately, investors are under the trance that deflation will be bad
for silver as the paper price could fall further. While this is true, I
believe the downside of silver is much less than the broader stock markets
such as the Dow Jones which is only off 12% from its peak last year.
Silver is down 71% from its peak of $49 in 2011.
We have already witnessed the majority of Deflation in the precious metals,
however the Bloodbath in the broader stock markets is just beginning.
Hedge Fund and Institutional investors better wake up and realize stock
valuations, dividends and yield will only head south going forward.
The DEATH OF YIELD IS COMING. Unfortunately, there
are only a few wise investors who continue to acquire silver while the
majority play Russian Roulette in the paper markets.
