Welcome to illuminati silver, we tell you
the truth about silver. Today is Friday 4th May and we are discussing
the Thomson Reuters World Silver Survey 2018 published last month.
Just as a brief background, the World Silver Survey has been published annually by the
Silver Institute since 1990. The survey is sponsored by a number of silver and precious
metal mining companies such as Fresnillo Plc, Pan American Silver, Wheaton Precious Metals,
Barrick Gold Corporation and many other well-known brands in this area. It is seen as one of
the more authoritative sources of what is actually going on in the world of silver demand
and supply. In summary; last year saw the 5th recorded
silver market deficit in a row. A deficit of some 26 million ounces was recorded with
mine supply falling by 4%. To put this mine supply fall in context though, it follows
13 consecutive years of annual increases – up to 2016.
Physical demand contracted by 2% in 2017 due to a fall of some 27% in coin and bar demand
– falling from 207.8 million ounces to 151.1 million ounces. This is now the second consecutive
annual decline in coin and bar demand falling from 292.1 million ounces in 2015 to 151.1
million ounces in 2017. Now this may surprise many listeners who hear the gurus constantly
claiming that physical silver demand is rising and off the charts, with record sales in silver
eagles etc etc. this simply is not the case and perhaps to use a now well-known expression
– they are peddling FAKE NEWS. Many reasons have been given for this fall
in demand including increased revenues moving into equities and a transfer to bitcoin and
other cryptocurrencies. Also, to some extent the fear that higher interest rates may also
reflect badly on both gold and silver prices. On a positive note, jewellery demand rose
by 2%, silverware by 12% and industrial fabrication by 4%. In fact, the interesting factor here
is the ever-increasing use of silver for industrial purposes. In 2017 demand for Industrial fabrication
represented some 70% of mine supply and 60% of total silver supply. This compares with
2016 of 65% and 56% respectively. One of the main reasons for this is that photovoltaic
demand rose by 19% driven particularly by solar panel usage, mainly by Chinese households.
So Mine supply is down 4%, with total supply down 3.7%, coin and bar demand is down 27%
with total physical demand down by 2.3% resulting in a physical deficit of 26 million ounces,
and once factoring in ETP and Exchange Inventory build, a total deficit of 35.2 million ounces.
The average price of silver fell from $17.14 in 2016 to $17.05 in 2017.
So what are we to make of these figures and what do they tell us about the future?
Well first of all, we should not be surprised to have seen little change in the average
silver price. Now for years people have been screaming manipulation, and whilst we have
some sympathy here, basic economics tells us that if supply=demand then price is likely
to remains constant. A deficit of 35.2 million ounces is tiny, if one considers that even
the most conservative assessor values above ground stocks of silver with almost immediate
access at around 1 billion ounces, with a fair number quoting closer to 2 billion ounces.
So, a continuous 35 million oz deficit can be arguably catered for over the next 30 years
before supply becomes imperilled. Now we are not advocating that because of course any
continuous deficit will of course cause prices to gradually increase but with Industrial
usage now accounting for 60% of total supply and frankly little on the immediate horizon
for this to increase significantly further (unless of course you believe that the world
economies are going to grow well above its current 2% -3%) then the only factor likely
to affect supply in any great numbers is a rise in demand for investment purposes, and
we have seen these figures actually falling recently.
Now what we are revealing is nothing revolutionary and the ‘pumpers’ who buy and sell precious
metals know this. Therefore, they are constantly pushing the doomsday scenario of imminent
economic collapse as a reason to purchase silver, as frankly without such an event occurring
silver prices are likely to remain range bound for a number of years. Yes, prices may creep
up slowly but only the long-term investor or accumulator is going to place their hard
earned dollars, pounds and euros into silver if they believe that it will hold value and
provide a positive return in years to come. Those who are relying on economic collapse
in the very near future may be disappointed as the pumpers have been pushing this message
since 2010 and we have all seen what has happened to precious metal prices since then.
Before we finish this video, its worth briefly mentioning the gold to silver ratio. Since
2010 it has increased steadily. Even in 2016 when it retreated slightly mid-year to 71.4:1
it still averaged 73.4:1 for the full year. The average for 2017 was 73.9:1 with the end
of 2017 standing at 77:1. Today it stands at 79.78:1 and has exceeded 80:1 a number
of times already this year. Now the Silver Institute actually suggests in its commentary
that perhaps an economic crisis may be on the cards or is looming, but seems to suggest
that based on historical behaviour, gold would be the first to rise in such a situation,
as people hedge their investments towards gold first and we quite frankly would tend
to agree with them. That said, on an historical basis silver represents
excellent value for money especially when compared to gold. However in the event of
a crisis gold is likely to be the initial beneficiary and silver following thereafter.
Our take on this situation is simple, long term silver is very attractive. Short term
it has many obstacles to overcome but we should see slightly appreciating prices. Only a major
political or economic storm, or a war, or our proverbial black swan event have to occur
before we may see silver back to its historical highs of $50 an ounce. In the meantime, for
physical collectors, look upon your hobby and collection as a 10 – 20 year investment
programme and only save in the knowledge that you are not likely to need those funds in
the very near future. That’s our take on the situation and since we started our channel
we have not been far out with our predictions so far. A few percentage points out yes – but
since the beginning have stated that the worlds banks and governments will stave off a global
financial meltdown for many years to come. We hope you have found this video interesting
and informative and if so, please give it a thumb up and share it on twitter. Also kindly
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Disclaimer: Illuminati Silver owners come from a background
of Banking, International Wealth Management and Economics. Having now retired from these
worlds we are not qualified to give investment advice. Therefore, this and other productions
must not be deemed to be giving such advice and merely represent the personal views of