Friday, January 20, 2012

Got Silver? An Overlooked Factor That Will Affect Supply This Year

Although the Bureau of Economic Analysis (BEA) reports that general business activity in the United States has recovered its pre-recession levels, no major independent economic series confirms that circumstance. Only the BEA’s overstated and heavily-politicized gross domestic product (GDP) measure makes that claim.  December readings on real (inflation-adjusted) retail sales, production and housing all showed patterns of slowing growth or contractions, either month-to-month or year-to-year, with levels below pre-recession highs.    - John Williams, Shadow Statistics
Silver is having a nice move higher today.  Those of us who trade it on a daily basis have been of the view that the trading action is indicative of "coiling" action, in which sell-offs are bought greedily by the buyers who understand how cheap silver truly is.  Today's action is a partial "uncoiling," as buyers are buying silver through resistance levels and short-sellers - like JP Morgan - are covering their shorts. 

I have to say with utmost sincerity and experience as a trader that anyone shorting silver at these levels - and with the underlying fundamentals supporting substantially higher price levels - is either a complete trading novice or a complete idiot with a wish to lose a lot of money.

Of course, one of the technical factors that will drive silver higher for awhile is the money raised by Sprott to buy 10,000,000 ounces silver.  Although they have already accounted for the silver on their NAV website, it will be interesting to see how long it takes for the silver to actually be delivered.  Ted Butler has issued a comment in which he thinks that this time around delivery will made quickly, as Sprott and Embry were quite vocal about how long it took to get delivery last time around.  Based on everything I see, hear, read and experience as a trader with regard to the silver market and readily available supply, I respectfully disagree with Mr. Butler. 

The United States produces about 35 million ounces of silver per year.  Already U.S. Mint silver eagle sales are running at a 60 million ounce run-rate.  This will undoubtedly slow down, but I think it's safe to say that silver eagle investment demand alone will easily exceed the 40 million ounces sold in 2011 and thus the mining supply from this country in 2012.  Add on to that the 10 million ounces Sprott is contracting to purchase and those two buying entities alone create a big supply deficit in this country.   Of course, silver is mined globally and, based on reports out of London, the international demand for actual, delivered physical silver is enormous and waiting times for delivery are stretched.

There's one of other factor the I'm surprised has not been mentioned in silver market commentary.  Hecla Mining, one of the largest pure silver miners in the world, had to shutter one of its mines in order to comply with safety regulations and clean out the access shaft.  Although this is a temporary situation - Hecla managment has said that this will reduce its silver production from 9 million ounces in 2012 to 7 million ounces.    So the mined output of silver in the U.S. will be around 33 million instead of 35 million ounces.

It would be a big mistake to assume that this 2 million ounces taken of the market this year will not affect the supply/demand situation, reducing supply and therefore adding to the demand forces that will force the price of silver higher this year.   A lot higher...

Have a great weekend.                 Etta James Rest In Peace (1939 - 2012)


  1. "... Sprott to buy 10,000 ounces silver."

  2. Boy now I understand the tag team against Ron Paul....independent journalism?

    John King (journalist)
    On May 25, 2008, King married fellow CNN reporter Dana Bash.[1]
    Dana Bash's Husband John King Ignores Ron Paul At Debate

    Dana Bash


    In January 2012, Revolution PAC (a super PAC associated with Ron Paul) called for Bash to be removed from reporting on the 2012 Republican Primaries.[6] This followed a number of heated exchanges between Bash and Paul, and Bash saying during a CNN report that she was worried the Ron Paul campaign would continue into the summer, and that he could "hurt whomever the Republican nominee is." Revolution PAC alleged this showed bias against Paul, but a CNN spokesman said Bash had since met with Paul, and that all is fine and she would be allowed to continue covering the campaign.[7]

    Dana Bash Admits She's Worried About Ron Paul's Success

  3. Thanks for pointing out the typo lol

  4. Hi - great to see silver go.

    Anyone know what's up with Barrick Gold today and therefore GDX - now the majors are playing up?

    Haven't been able to find what is the cause of Barricks slam.

    Slowly I am being convinced that miners aren't the right thing and metals the only way. Like Jim Rogers keeps on saying stick with the commodities.


  5. Etta Baby,

    I bet She was was a hot one. I loved her singing before the movie and still do! Too bad She got "smacked".


  6. We don't need new regulations, we need honest enforcement of the laws...

    Top Justice officials linked to mortgage banks
    Pressure rises on Justice to open wide-ranging probe of mortgage servicers

    U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department's criminal division, were partners for years at a Washington law firm that represented a Who's Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

    The firm, Covington & Burling, is one of Washington's biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.

    While Holder and Breuer were partners at Covington, the firm's clients included the four largest U.S. banks - Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co - as well as at least one other bank that is among the 10 largest mortgage servicers.

    Did he go to acting school?

    Lanny Breur

  7. The Global Elite Are Hiding 18 Trillion Dollars In Offshore Banks

    In recent days, the fact that Mitt Romney has millions of dollars parked down in the Cayman Islands has made headlines all over the world. But when it comes to offshore banking, what Mitt Romney is doing is small potatoes. The truth is that the global elite are hiding an almost unbelievable amount of money in offshore banks. According to shocking research done by the IMF, the global elite are holding a total of 18 trillion dollars in offshore banks. And that figure does not even count any money being held in Switzerland. That is a staggering amount of money. Keep in mind that U.S. GDP in 2010 was only 14.58 trillion dollars. So why do the global elite go to such trouble to hide their money in offshore banks? Well, there are two main reasons. One is privacy and the other is low taxation. Privacy is a big issue for those that are involved in illegal enterprises such as drug running, but the biggest reason why people move money into offshore banks is in order to avoid taxes. Some set up bank accounts in foreign nations because they want to legally minimize their taxes and others set up bank accounts in foreign nations because they want to illegally avoid taxes. You would be absolutely amazed at what some large corporations and wealthy individuals do to get out of paying taxes. Unfortunately, the vast majority of the rest of us don’t have the resources or the knowledge to play these games, so we get taxed into oblivion.

    So why do they call it “offshore banking”?

    These days, taking advantage of offshore tax havens is not that complicated to do. The following is from a recent Politico article....

    A plausible scenario plays out like this: I hire an accountant. Doing her job, my accountant tells me that if I sign a few legal documents and route my money through a small Caribbean island, I could keep more of my paycheck and pay a lower tax rate. I may have earned my money in the United States, but legally I can claim that it was, in fact, earned in a tax haven.

    If it is legal, perhaps more of us should look into this.

  8. Economic Collapse amids a Mini-Recovery

    If the entire financial system does not come down upon our heads and if we do not have another war, global growth is going nowhere in the year’s ahead. We had a mini-recovery, but it cost $1.8 trillion. We had a second recovery and that cost $1.5 trillion. We are entering a third of what is becoming yearly recoveries that will probably cost $1.3 trillion. In other worlds without these massive injections of money and credit we would probably be in a deflationary depression.

    Over and over again we see other professionals still recommending US Treasuries yielding anywhere from zero to 1.87%, while official inflation is 3.8% and real inflation is 11.6%. These buyers of Treasuries have to have some fierce pressure put on them to purchase such investments; some are predicting a 2-1/2%, 30-year bond and a 1-1/2% 10-year note. Those gains are fine, but they nowhere offset the inflationary risk. For 25 years bonds have outperformed stocks, but few money managers talk about the outsized returns in gold and silver related assets. That isn’t acceptable and probably never will be. Professionals going the income route may be able to return 5% or even 7%, but that is not sufficient in having to deal with inflation and the volatility of the market. Producing gold and silver mines are selling at 15 times earnings when they could sell substantially higher based on P/E and gold and silver prices. You are looking at very easy 50% increases.

    As we pointed out earlier retail consumption is going to fall. Except for the second and third world in major countries growth in GDP has only been available with massive stimulus and we see nothing to change that. Look at what the Fed and the ECB did three weeks ago; they poured $10 trillion into the European economies, if needed. That approach won’t change because there is no alternative and the situation is worsening. All Western economies will be lucky to have 2% GDP growth this year in spite of stimulus.

    As we have written before, lurking in the wings is the French presidential primary in April. Socialist François Hollande, is now parroting Marine Le Pen of the Front National, to dump the euro and the EU. Sarkozy is only two-points ahead of Hollande and his plan for a financial transaction tax is losing momentum. He may not even make the May final.

    In this unsettling atmosphere the US is now running the show, but no one in Europe will admit that. The Fed has lent the ECB, illegally, $1 trillion in what they call a swap, which is simply phony. Using fractional banking prudently we see ultimately $10 trillion being available to function with. Whether fractionalization will be use remains to be seen. As you can see, $1 trillion alone can keep the euro floating for a year, whether one or three countries drop out.

  9. Send this to 10 people...

    Is Ron Paul an Isolationist as Newt Gingrich and Rick Santorum Claim?

    If that’s what it means to be an isolationist, count me as one too.

    It’s easy to understand why this inappropriate label is stuck on Paul. Establishment conservatives and progressives are terrified by him and desperately want him to go away. They’re terrified because he has done the worst thing imaginable: he has held up a mirror and reminded them of what they are.
    He has shown establishment conservatives and even so-called Republican moderates (such as Mitt Romney and Jon Huntsman) that they are, and long have been, apologists for empire and therefore betrayers of the republican (small-r) ideals they say they embrace. When Paul condemns past, present, and future aggressive wars (such as the one being planned for Iran); when he calls for closing America’s 900 military installations in over 40 countries and removing America's troops from 130 countries; when he advocates an end to all economic and military aid to foreign governments (including Israel’s); and when he opposes wholesale violation of the Bill of Rights (see the PATRIOT Act and the National Defense Authorization Act), he is saying to his Republican rivals, You have helped destroy individual liberty by shamefully supporting the U.S. global empire, which brutalizes foreign populations, fosters an exploitative military-industrial complex, violates civil liberties, and burdens the American people with obscene debt, taxation, and Federal Reserve monetary manipulation.

  10. Ron Paul on FOX News w/ Neil Cavuto 01/21/12...

    he couldn't cut ron paul off fast enough

  11. OpEd: It's Dying (Calen Fretts)...GO LIBERTARIAN

    But there's a new party in town.

    The Libertarian Party has only been around for about 40 years, but the principles it stands for go back centuries. America's Founding Fathers were the first modern Libertarians. They sought a life free of the King's dictates. So they wrote the Declaration of Independence, testifying that all men are created equal, and that rights come from the Creator - not from kings, governments, or anyone else.

    But men like George Washington and Thomas Jefferson would be shocked at our modern government. They grew hemp and made moonshine, both of which are illegal today. They did not ask for permission to own and carry a firearm. They certainly did not obtain a permit to wager a bet on a friendly game of cards. By all accounts, Washington and Jefferson, those symbols of American liberty, would be common criminals in modern America. Our Congress has stacked the deck in this way, because it enables them to play out the game in their favor.

    The message of Liberty was, and is, about individual empowerment. The ability to live free of force from others. To live in a nation of laws, not of men. To enjoy the comfort of one's own castle, where every man is his own king. The government's role is not to give us rights (which it cannot do), nor to infringe upon them; but rather, simply to protect our natural rights.

  12. Good observation Dave. Another factor to consider is that Sprott may not stop at 10MM ounces. This might just be the first in a series of tranches. This buying spree is $300MM, but his shelf filing allows for $1.5B. More to come and possibly this year?

  13. Cpl Jesse Thorsen Speaks Out For Ron Paul Despite US Army Censorship!

  14. I believe silver hits at least a few hundred $ per ounce in the next 5 years or so. But in the meantime, it would not surprise me if manipulation takes it way down, to $10 to $15 oz, before it launches.

  15. I wonder if they do this to get people to actually buy the debt?..hmmm

    Wolf Richter: Austrian Central Bank – Bribery, Kickbacks, Money Laundering

    At the center is a subsidiary of the OeNB, the Oesterreichische Banknoten- und Sicherheitsdruck GmbH (OeBS). It prints money, literally. And it has been soliciting bank-note deals from foreign governments since 2000. According to the prosecution, OeBS paid €17 million in bribes to Syrian officials to obtain orders from the Syrian government. Payments were routed to offshore outfits, such as the Panamanian mailbox company Venkoy, whose representatives were in Switzerland. The prosecutor is further investigating €1.7 million in kickbacks that made their way back to Austria. Similar arrangements with Azerbaijan are also being investigated. Bits and pieces of the affair began to see the light of the day last June, when Austrian tax authorities raised questions about the deductibility of these payments.

    Nowotny, Duchatczek, and Zöllner were accused of having known about the bribery of foreign public officials in connection with the acquisition of bank-note printing orders. The OeNB, of course, defended its directors: the accusations were based on statements by fired employees—implying that it’s nothing but a vendetta. Based on the information the directors had in front of them at the time, they’d assumed that the payments were for actual and legitimate services, and that the acquisition of orders complied with all applicable rules and laws, the OeNB said.

  16. Everyone is giving up on Ron squeaky clean Paul...Why????????

    Mitt Romney


    Then, as Mitt Romney just announced he is releasing some of his income taxes, we look into the source of the wealth of the company he created, Bain Capital. Joining us is Justin Elliot, a reporter for who has an article at Salon “The Roots of Bain Capital in El Salvador’s Civil War”.

    The roots of Bain Capital in El Salvador’s civil war
    Romney tapped El Salvador's wealthy families, including one linked to right-wing death squads

  17. You're a mark....

    Kim Dotcom vs Corzine and Modern Day Letters of Marque

    A letter of Marque is a government license authorizing a person to be a pirate (a privateer). This authority defines who is a patriot and who becomes the criminal. Today Kim Dotcom (megaupload) the owner operator of an electronic self storage locker gets to have all his property sued and then confiscated worldwide without a trial! CONFISCATION OF PROPERTY WORLDWIDE WITHOUT A TRIAL OR A GUILTY VERDICT OF ANY KIND. This way his assets can be used by the security state until such time as they are proved innocent of conspiracy of illegality of any kind. Meanwhile he has not been proved guilty in any court of law anywhere. Yet the FBI can have NZ, HK, and other international authorities confiscate millions thereby leaving the burden of innocence of proof to be proven by his lawyers. Meanwhile Jon Corzine , who has a letter of Marque, gets to keep all his property even though much of it may ethically belong to customers. Other parties with Letters of Marque include the movie industry, the copyright police, the trustee and judge involved in MF Global wind down, Louis Freeh, JPM, and other state sponsored players. Property rights are now non existent, laws are by decree, and your future freedom has been put into peril from every direction possible.

  18. Currency Wars - Iran Banned From Trading Gold and Silver

    The Iranian geopolitical tension is supporting gold as Britain, America and France have delivered a clear message to Iran, sending six warships led by a 100,000 ton aircraft carrier through the highly sensitive Strait of Hormuz.

    Reuters report that the EU has agreed to freeze the assets of the Iranian central bank and ban all trade in gold and other precious metals with the Iranian Central Bank and other public bodies in Iran.

    According to IMF data, at the last official count (in 1996), Iran had reserves of just over 168 tonnes of gold. The FT reported in March 2011 that Iran has bought large amounts of bullion on the international market to diversify away from the dollar, citing a senior Bank of England official.

  19. China tiptoes to petrodollar recycling

    The deal with the UAE is worth $5.5 billion — bilateral trade was $36 billion last year with Chinese exports accounting for two-thirds — and aims at “strengthening bilateral financial cooperation, promoting trade and investments and jointly safeguarding regional financial stability”, according to the Chinese central bank. China is, in essence, providing ’seed money’ so that businessmen wouldn’t need to convert every transaction into dollars, thereby lowering the foreign exchange costs.

    The cool reasoning here is practical convenience but its shadows inevitably fall on other domains. Clearly, the Middle East is being ’sensitized’ about the renminbi’s role. To be kept as reserve currency in the UAE vaults enhances renminbi’s prestige. For the UAE, keeping the mighty yuan is one of the safest thing they ever did in the world of high finance, as the appreciation of the Chinese currency in value is a near-certain happening in the future.

    The heart of the matter is that the GCC currencies are pegged to the greenback and their massive earnings are largely ploughed into the bank vaults in London or New York or are used to acquire assets such as US equities and Treasury bonds — that is, when they are not spent on arms deals and other extravagant spendings.

  20. Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement”

    Obama’s latest housing market chicanery should come as no surprise. As we discuss below, he will use the State of the Union address to announce a mortgage “settlement” by Federal regulators, and at least some state attorneys general. It’s yet another gambit designed to generate a campaign talking point while making the underlying problem worse.

    The president seems to labor under the misapprehension that crimes by members of the elite must be swept under the rug because prosecuting them would destablize the system. What he misses is that we are well past the point where coverups will work, and they may even blow up before the November elections. If nothing else, his settlement pact has a non-trivial Constitutional problem which the Republicans, if they are smart, will use to undermine the deal and discredit the Administration.

  21. USA Today Gives JP Morgan Free Pass

    “Rules and regulations that allow business to thrive”? There sure doesn’t seem to be any rules or regulations to punish big banks for the crime and rip-offs that they have committed against the public, and you won’t hear it brought up by any of the mainstream media (MSM) either. Why didn’t Ms. Bartiromo ask about Massachusetts Attorney General Martha Coakley and the case she filed 7 weeks ago that alleges foreclosure fraud against Dimon’s bank? The lawsuit is alleging JP Morgan Chase and 4 other big banks “. . . improperly foreclosed on troubled borrowers by relying on fraudulent legal documentation . . .” (Click here for more on the Mass. AG’s case.) This is a case that has major nationwide implications. How could Bartiromo just leave this out of her questions? This is just one of several cases that have been filed against the big banks over the past few years. Leaving this completely out of the question list is why I say this is a PR job and not journalism.


    Il Folletto

  23. Why Hasn’t the Day of Financial Armageddon Occurred Yet?

    Chicken Little comes to mind

    Bring up the topic of a day of financial Armageddon and you are likely to be ridiculed and likened to Chicken Little, a fable about a chicken that thought the end of the world was near. I’ve had so many friends tell me they don’t want to hear what I have to say about the economy. Yes, it is too unsettling. But it is something much deeper rooted than the troublesome numbers, it is their misplaced faith in the US government, inculcated in them from their grade-school days, that is being shaken. Mass denial makes it easier for government to pull the wool over everyone’s eyes.

    What government is doing behind the scene

    The US Treasury Department has printed new money that is being stored in a warehouse, possibly for the day when the US dollar is officially devalued (maybe at the conversion of rate of 6 or 7 new dollars for every 10 old dollars). Federal officials say these 100-dollar bills were misprinted, but why don’t they burn them instead of store them?

    The next generation will repudiate all this debt

    On a more positive note, Gary North says the current generation will repudiate all this debt. If we are all broke, how are they going to get everyone to make their mortgage payment, pay their taxes, etc.?

    Recognize the goal of the elites is to transfer their losses onto the masses. But maybe not this time. We see lenders to Greece maybe facing a 90% write down in their loans. But don’t forget, lending banks also hold our saved money and 401k plans. Our banked money is likely to get swept away in a day of reckoning.

  24. Admiral Sprott!
    Given its status as the world’s only audited, redeemablesilver fund, run by a true ally of PM investors, the Sprott Physical Silver Trust could be this year’s most important stock in the entire world. Thus, the premium on PSLV to its Net Asset Value (NAV), and to a lesser extent that of its sister fund, the Sprott Physical Gold Trust (PHYS), must be watched by ALL PM investors on a daily, or at least weekly, basis. Below are links to the daily NAV of each of these funds.

  25. Ciao Il Folletto.

    Come stai? Il mio preferito Denver Nugget giocatore di basket è Danilo Galinari!

    How credible do you think that Debka report is?

  26. ad esempio in russia da astrachan a bander abbass il purchase ha il controvalore in oro anche se non pagano oro: è sempre stato così a prescindere da embargo.
    Altri beni invece hanno controvalore in crude oil barrels: materia prima contro materia prima.

  27. Now also Jim Sinclair reports from Debka.