The Fire Rises Why all those detailed silver
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Posted On: 05/24/2021 8:14:02 PM
The Fire Rises
Why all those detailed silver supply-demand analyses soon won't matter, and why mine and refinery supply is insignificant to investor demand

Due Diligence
This is too long for most, so here is the brief summary:
Mine or refiner supply doesn't add up to much and I doubt it supplies much of the investment demand market. Apes are investors and investors tend to buy silver sporadically whereas mines produce a slow continuous stream. Not a good match.
Silver is always available at a true market price, so, let's all quit saying that there is a shortage.
Supply-demand discussions are for those periods where the market is static. Whatever the supply-demand situation was before the squeeze, it has already changed quite a bit. In my opinion, when silver is once again viewed as a primary method of wealth preservation, that new investment demand will dwarf all other supply-demand factors.
________________________________________________________________________
And the details:
Many analysts and WallStreetSilver folks alike discuss silver supply and demand numbers to guide their perceptions for silver price changes. Usually the Silver Institute’s numbers form a starting point for that discussion. They are done by Metals Focus, a research shop in London. A link is provided at the end of this piece for a recent report.
Some folks dispute their numbers. Most recently by Keith Neumeyer, the CEO of First Majestic. I’d bet that a deep dig would reveal that the supply demand situation is more stretched than presented. There are many institutions spoofing the market with data right now as the deep state fights to keep their fiat relevant.
Regardless, if I ran an organization called the Silver Institute, I would probably do a supply-demand analysis as they have.
But I am an investor. Unlike gold, silver has a substantial industrial component. Many analysts and silver investors get confused when they look at the silver supply numbers from mines and recycle and then ignore the other industrial demand factors. Since investors share this market with industry we need to be cognizant of industrial demand and we need to adjust the supply-demand numbers to the needs of an investor.
But none of this will matter and I will get to that.
The mines and recycle supply number is 1,057 million oz per year, which works out to 2.9 million oz per day.
The conceptual error occurs when analysts focus on mine and recycle supply and effectively assume that industrial demand will cease for periods where investment demand surges. If you own a business that utilizes silver in your product, are you going to shut down your business because PSLV bought 2.9 million oz of silver that day? Of course not.
Silver investment demand will likely someday nudge some industrial demand out of the market, but it will happen due to an increased silver price. If demand from silver investors increases the silver price to $100/oz, industry will become more efficient at using silver. That is Adam Smith’s invisible hand. That is how markets work. To think that industry will cease and desist while investors absorb all mine supply is incorrect.
The Silver Institute’s numbers are a snapshot in time. Industry demand will increase or decrease as technologies come and go causing production of silver based products to ebb and flow. Someday those changes will matter. Knock yourself out analyzing it all.
It just doesn’t matter.
I want to advance a concept and not debate the exact numbers. Once you understand the concept, current mine supply and industrial demand numbers are irrelevant compared to surges in investment demand.
First, we need to understand the market. The key concept is to focus on net supply after deducting other industrial demand.
Restructuring the Silver Institutes numbers for an investor
They have a line item called “market balance”. What does that mean? It is the leftovers from their math? So all that leftover silver gets thrown in the trash? I don’t care what they call investor demand. All that matters is supply minus non-investment demand.
Here are my adjusted numbers. I’m disregarding the greyed out “net investor demand” and focusing on the net of supply minus non-investor demand:
https://www.silverinstitute.org/silver-supply-demand/

All that matters to me right now is that the net supply is a low number – about 0.76 million oz per day. In this market equilibrium, all investors worldwide compete for that net supply number.
Investor Demand Surges and Market Supply
After large purchases of silver by any Trust who actually buy physical metal, I often hear questions or comments about the bars being purchased from mines or refiners.
Demand surges for large entities, like physical ETFs or any large purchaser, is likely sourced from existing supply of bars.
Consider the 3-1/2 months since the start of the start of the silver squeeze. Just one entity, previously a smaller ETF, Sprott’s PSLV has purchased 53 million oz of silver. PSLV’s purchases alone would amount to 2/3 of the net supply.
The hypothesis is that all the new investor demand feeds off mine supply. On a day where PSLV purchases 1 million oz of silver, does the remainder of the world’s silver investors stand down? I’d surmise in the negative. The supply is likely coming from existing vaulted silver.
If you assume that the available investment volume of silver is 2 billion oz, then the net mine supply would take 7.2 years to create that volume. I really doubt that investment volume of silver is growing 14% per year, but let’s use that number. A lower number would make my point even more apparent.
Let’s apply the often used Olympic swimming pool analog. A garden hose (5 gal/minute) would take that same 7.2 years to fill 29 Olympic sized swimming pools. Imagine 29 Olympic sized swimming pools full of water and one garden hose flowing into one of the pools. The garden hose is the new supply coming into the investment arena. The 29 pools are the total available inventory.
Since the start of the squeeze, PSLV has entered this supply-demand market 67 of the last 81 business days to purchase at least 100,000 oz of silver. On a typical day (P50), they buy 300,000 oz of silver.
Let’s envision a pretty good day for PSLV where they are buying 500,000 oz. of silver. This has occurred about 1/3 of the days since the squeeze start. In our pool analog, 500,000 oz of silver is the equivalent of 0.6 inches of water in just one of the 29 Olympic sized pools.
It’s a hot day and babes in bikinis are lounging around. PSLV enters the pool area and the hottest babes run up to high five the PSLV crew. Michael Phelps is relaxing on a chaise lounge wondering how he’s turned to chopped liver. But the PSLV crew has business at hand.
Their investors have directed them to buy 500,000 oz by sending PSLV $13 million. Do you think PSLV’s crew go to the garden hose and wait 16 hours as the hose trickles in? Or do they dip a big fat pipe right in the pool and suction 0.6 inches straight out of the pool?
I’m going to vote for … OUT OF THE POOL!
This post squeeze era is in stark contrast to the way PSLV was before the silver squeeze. Since 2012 to the start of the squeeze, PSLV purchased an average of 7.6 million oz per year. That would be 2.7% of the net new supply … the water trickling out of the hose. An average day’s purchase for all those earlier years would have been the equivalent of filling up their bucket using the garden hose in 23 minutes.
I suppose they could have bought bars directly from mines before the squeeze. But I don’t really care about that now because it is vastly different from the current situation.
It just doesn’t matter.
With the ape raid starting over the weekend of January 26, everything in the commercial market changed when trading opened at 9:30 AM on January 28, 2021.
Mine supply and investor demand doesn’t pair
Mine supply or refiner supply is a fairly consistent stream. There are plenty of industrial users who also have near continuous demand. Those silver buyers would be a good match for mine or refinery supply. Since most of the business world works off of contracts, I suspect that most refiners have much of their supply tied to contracts with users who have consistent demand.
Industrial sellers do not like to break contracts for a short term deal. A mine or refiner will alienate their long term buyers to do a short term deal if it means cutting off the long term buyer.
I would guess that most mines or refiners would routinely deal with an investor buyer because investor demand can change immediately.
As an example, I recently approached several local scrap yards asking to buy all their copper. I envisioned getting several roll-offs full of copper … a different way to stack. The scrap yards had zero interest in discussing a deal, even with a fiat bonus. They told me their supply was tied up in contracts with buyers (in China) that they have been dealing with for many years. Sure, Eric Sprott has a bigger reputation than Ditch_the_DeepState, but he is not a long term buyer.
I suspect that a high fraction of the mine and refiner supply is associated with longer term contracts. That would leave a much smaller number than 0.76 million oz per day available for investor purchases.
But, it just doesn’t matter.
Homeless and orphan silver bars
Newly minted bars are made to standards that have been in place for many years. I don’t see any reason why bars from the refiner would be received by investors any different than bars deep in any commercial vaults.
I suppose the only difference is that there is a chance that a new bar may be in need of a new owner assuming it hasn’t been pre-sold by a contractual arrangement. So they are orphans?
But any bars remaining at the refinery can easily be sold. Silver is a huge, liquid market. Bars can be bought and sold at any time at the true market price. That is what defines a market price.
Back to the garden hose analog, the instant water leaves the hose, it is in the pool and is no different than any of the water in the 29 pools. So a an orphaned bar at the refiner is really no different than a bar deep in a vault.
Perhaps I should make clear that I'm talking about a market that is the largest players of the commercial market. I'm talking about folks holding millions of oz and trading 100,000s of oz at a time. These folks have no emotional attachment to their metal. They aren't posting pictures of their stack on WSS. They want a return on their capital, and if they can pick up some basis over spot, they do it.
Spreads of physical bars compared to paper contracts quoted at comex may change based on location and temporary imbalances, but they can always be sold immediately.
I will post a deep dig on this in the near future.
Silver is always available at the market price
When SLV and the other ETF’s who modified their prospectus claimed they may not be able to source bars … it was a ruse. All they communicated was they were not going to impose true price discovery on the market. Let’s all quit saying that “we are running out of silver”. Silver is always available at the true market price.
To connect these concepts … it is not necessary for a physical silver fund to feed off supply from the mines or refineries because “we are running out of silver”. Silver is always available at the true market price.
This is what I wrote after the SLV ruse:
https://www.reddit.com/r/Wallstreetsilver/com...erback_of/
But it just doesn’t matter.
What does matter?
I’ve snarkily peppered this piece with the “it just doesn’t matter”. So what does matter?
What matters regarding supply and demand in the silver market:
1. Pre-health scare, investor demand was extremely low since silver (and gold) have been ostracized for years and not in the typical investor’s consciousness. You could write a book on that brainwashing exercise by the deep state.
2. Post health scare and before the squeeze, net supply was still low relative to investor demand.
3. Post squeeze, investor demand is much greater … at the commercial level in physical ETFs, deliveries on comex at the local coin shop. However, the numbers of buyers still remain a small fraction of potential demand since most investors are ignorant of history.
Someday, a small number of investors around the world, say 1 million will wake up, literally and figuratively, and realize that silver and gold are, the consummate hard assets for wealth protection. They will decide to buy, say 1000 oz of silver each. The vast majority of that small minority will not obtain their goal. It won’t matter where they attempt to purchase their silver or gold. Their budget will be exhausted long before they obtain 1000 oz.
At that point, all the detailed supply-demand analysis ever done just doesn’t matter.
________________________________________________________________________________________________
Banned on twitter for presenting JP Morgan in a diminutive fashion. Screw the deep state.
Always on GAB
https://gab.com/Ditch_the_DeepState
And now on Ditch_the_DeepState's own web site!! No, it's not called Ditch the deep state. It's a day old and and not much there yet. Here's the link:
https://EconAnalytics.net
.
Why all those detailed silver supply-demand analyses soon won't matter, and why mine and refinery supply is insignificant to investor demand

Due Diligence
This is too long for most, so here is the brief summary:
Mine or refiner supply doesn't add up to much and I doubt it supplies much of the investment demand market. Apes are investors and investors tend to buy silver sporadically whereas mines produce a slow continuous stream. Not a good match.
Silver is always available at a true market price, so, let's all quit saying that there is a shortage.
Supply-demand discussions are for those periods where the market is static. Whatever the supply-demand situation was before the squeeze, it has already changed quite a bit. In my opinion, when silver is once again viewed as a primary method of wealth preservation, that new investment demand will dwarf all other supply-demand factors.
________________________________________________________________________
And the details:
Many analysts and WallStreetSilver folks alike discuss silver supply and demand numbers to guide their perceptions for silver price changes. Usually the Silver Institute’s numbers form a starting point for that discussion. They are done by Metals Focus, a research shop in London. A link is provided at the end of this piece for a recent report.
Some folks dispute their numbers. Most recently by Keith Neumeyer, the CEO of First Majestic. I’d bet that a deep dig would reveal that the supply demand situation is more stretched than presented. There are many institutions spoofing the market with data right now as the deep state fights to keep their fiat relevant.
Regardless, if I ran an organization called the Silver Institute, I would probably do a supply-demand analysis as they have.
But I am an investor. Unlike gold, silver has a substantial industrial component. Many analysts and silver investors get confused when they look at the silver supply numbers from mines and recycle and then ignore the other industrial demand factors. Since investors share this market with industry we need to be cognizant of industrial demand and we need to adjust the supply-demand numbers to the needs of an investor.
But none of this will matter and I will get to that.
The mines and recycle supply number is 1,057 million oz per year, which works out to 2.9 million oz per day.
The conceptual error occurs when analysts focus on mine and recycle supply and effectively assume that industrial demand will cease for periods where investment demand surges. If you own a business that utilizes silver in your product, are you going to shut down your business because PSLV bought 2.9 million oz of silver that day? Of course not.
Silver investment demand will likely someday nudge some industrial demand out of the market, but it will happen due to an increased silver price. If demand from silver investors increases the silver price to $100/oz, industry will become more efficient at using silver. That is Adam Smith’s invisible hand. That is how markets work. To think that industry will cease and desist while investors absorb all mine supply is incorrect.
The Silver Institute’s numbers are a snapshot in time. Industry demand will increase or decrease as technologies come and go causing production of silver based products to ebb and flow. Someday those changes will matter. Knock yourself out analyzing it all.
It just doesn’t matter.
I want to advance a concept and not debate the exact numbers. Once you understand the concept, current mine supply and industrial demand numbers are irrelevant compared to surges in investment demand.
First, we need to understand the market. The key concept is to focus on net supply after deducting other industrial demand.
Restructuring the Silver Institutes numbers for an investor
They have a line item called “market balance”. What does that mean? It is the leftovers from their math? So all that leftover silver gets thrown in the trash? I don’t care what they call investor demand. All that matters is supply minus non-investment demand.
Here are my adjusted numbers. I’m disregarding the greyed out “net investor demand” and focusing on the net of supply minus non-investor demand:
https://www.silverinstitute.org/silver-supply-demand/

All that matters to me right now is that the net supply is a low number – about 0.76 million oz per day. In this market equilibrium, all investors worldwide compete for that net supply number.
Investor Demand Surges and Market Supply
After large purchases of silver by any Trust who actually buy physical metal, I often hear questions or comments about the bars being purchased from mines or refiners.
Demand surges for large entities, like physical ETFs or any large purchaser, is likely sourced from existing supply of bars.
Consider the 3-1/2 months since the start of the start of the silver squeeze. Just one entity, previously a smaller ETF, Sprott’s PSLV has purchased 53 million oz of silver. PSLV’s purchases alone would amount to 2/3 of the net supply.
The hypothesis is that all the new investor demand feeds off mine supply. On a day where PSLV purchases 1 million oz of silver, does the remainder of the world’s silver investors stand down? I’d surmise in the negative. The supply is likely coming from existing vaulted silver.
If you assume that the available investment volume of silver is 2 billion oz, then the net mine supply would take 7.2 years to create that volume. I really doubt that investment volume of silver is growing 14% per year, but let’s use that number. A lower number would make my point even more apparent.
Let’s apply the often used Olympic swimming pool analog. A garden hose (5 gal/minute) would take that same 7.2 years to fill 29 Olympic sized swimming pools. Imagine 29 Olympic sized swimming pools full of water and one garden hose flowing into one of the pools. The garden hose is the new supply coming into the investment arena. The 29 pools are the total available inventory.
Since the start of the squeeze, PSLV has entered this supply-demand market 67 of the last 81 business days to purchase at least 100,000 oz of silver. On a typical day (P50), they buy 300,000 oz of silver.
Let’s envision a pretty good day for PSLV where they are buying 500,000 oz. of silver. This has occurred about 1/3 of the days since the squeeze start. In our pool analog, 500,000 oz of silver is the equivalent of 0.6 inches of water in just one of the 29 Olympic sized pools.
It’s a hot day and babes in bikinis are lounging around. PSLV enters the pool area and the hottest babes run up to high five the PSLV crew. Michael Phelps is relaxing on a chaise lounge wondering how he’s turned to chopped liver. But the PSLV crew has business at hand.
Their investors have directed them to buy 500,000 oz by sending PSLV $13 million. Do you think PSLV’s crew go to the garden hose and wait 16 hours as the hose trickles in? Or do they dip a big fat pipe right in the pool and suction 0.6 inches straight out of the pool?
I’m going to vote for … OUT OF THE POOL!
This post squeeze era is in stark contrast to the way PSLV was before the silver squeeze. Since 2012 to the start of the squeeze, PSLV purchased an average of 7.6 million oz per year. That would be 2.7% of the net new supply … the water trickling out of the hose. An average day’s purchase for all those earlier years would have been the equivalent of filling up their bucket using the garden hose in 23 minutes.
I suppose they could have bought bars directly from mines before the squeeze. But I don’t really care about that now because it is vastly different from the current situation.
It just doesn’t matter.
With the ape raid starting over the weekend of January 26, everything in the commercial market changed when trading opened at 9:30 AM on January 28, 2021.
Mine supply and investor demand doesn’t pair
Mine supply or refiner supply is a fairly consistent stream. There are plenty of industrial users who also have near continuous demand. Those silver buyers would be a good match for mine or refinery supply. Since most of the business world works off of contracts, I suspect that most refiners have much of their supply tied to contracts with users who have consistent demand.
Industrial sellers do not like to break contracts for a short term deal. A mine or refiner will alienate their long term buyers to do a short term deal if it means cutting off the long term buyer.
I would guess that most mines or refiners would routinely deal with an investor buyer because investor demand can change immediately.
As an example, I recently approached several local scrap yards asking to buy all their copper. I envisioned getting several roll-offs full of copper … a different way to stack. The scrap yards had zero interest in discussing a deal, even with a fiat bonus. They told me their supply was tied up in contracts with buyers (in China) that they have been dealing with for many years. Sure, Eric Sprott has a bigger reputation than Ditch_the_DeepState, but he is not a long term buyer.
I suspect that a high fraction of the mine and refiner supply is associated with longer term contracts. That would leave a much smaller number than 0.76 million oz per day available for investor purchases.
But, it just doesn’t matter.
Homeless and orphan silver bars
Newly minted bars are made to standards that have been in place for many years. I don’t see any reason why bars from the refiner would be received by investors any different than bars deep in any commercial vaults.
I suppose the only difference is that there is a chance that a new bar may be in need of a new owner assuming it hasn’t been pre-sold by a contractual arrangement. So they are orphans?
But any bars remaining at the refinery can easily be sold. Silver is a huge, liquid market. Bars can be bought and sold at any time at the true market price. That is what defines a market price.
Back to the garden hose analog, the instant water leaves the hose, it is in the pool and is no different than any of the water in the 29 pools. So a an orphaned bar at the refiner is really no different than a bar deep in a vault.
Perhaps I should make clear that I'm talking about a market that is the largest players of the commercial market. I'm talking about folks holding millions of oz and trading 100,000s of oz at a time. These folks have no emotional attachment to their metal. They aren't posting pictures of their stack on WSS. They want a return on their capital, and if they can pick up some basis over spot, they do it.
Spreads of physical bars compared to paper contracts quoted at comex may change based on location and temporary imbalances, but they can always be sold immediately.
I will post a deep dig on this in the near future.
Silver is always available at the market price
When SLV and the other ETF’s who modified their prospectus claimed they may not be able to source bars … it was a ruse. All they communicated was they were not going to impose true price discovery on the market. Let’s all quit saying that “we are running out of silver”. Silver is always available at the true market price.
To connect these concepts … it is not necessary for a physical silver fund to feed off supply from the mines or refineries because “we are running out of silver”. Silver is always available at the true market price.
This is what I wrote after the SLV ruse:
https://www.reddit.com/r/Wallstreetsilver/com...erback_of/
But it just doesn’t matter.
What does matter?
I’ve snarkily peppered this piece with the “it just doesn’t matter”. So what does matter?
What matters regarding supply and demand in the silver market:
1. Pre-health scare, investor demand was extremely low since silver (and gold) have been ostracized for years and not in the typical investor’s consciousness. You could write a book on that brainwashing exercise by the deep state.
2. Post health scare and before the squeeze, net supply was still low relative to investor demand.
3. Post squeeze, investor demand is much greater … at the commercial level in physical ETFs, deliveries on comex at the local coin shop. However, the numbers of buyers still remain a small fraction of potential demand since most investors are ignorant of history.
Someday, a small number of investors around the world, say 1 million will wake up, literally and figuratively, and realize that silver and gold are, the consummate hard assets for wealth protection. They will decide to buy, say 1000 oz of silver each. The vast majority of that small minority will not obtain their goal. It won’t matter where they attempt to purchase their silver or gold. Their budget will be exhausted long before they obtain 1000 oz.
At that point, all the detailed supply-demand analysis ever done just doesn’t matter.
________________________________________________________________________________________________
Banned on twitter for presenting JP Morgan in a diminutive fashion. Screw the deep state.
Always on GAB
https://gab.com/Ditch_the_DeepState
And now on Ditch_the_DeepState's own web site!! No, it's not called Ditch the deep state. It's a day old and and not much there yet. Here's the link:
https://EconAnalytics.net
.
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