Thirty Years of Silver Supply Deficits

In a recent announcement, from the media “consultants” who provide most of our official data for precious metals markets, we were told that the silver market just experienced a supply deficit for “the 3^rd consecutive year.” However, as recently pointed out by another, noted silver commentator, Steve St. Angelo, the same consultants have produced data showing that the silver market has been in a supply deficit for twelve consecutive years – four times as long as what they just finished claiming, publicly.

Is that the end of the story, twelve consecutive years of silver supply deficits? Not quite. If we go back 12 years in time; this brings us squarely within the time-frame of an old chart, which will be familiar to many readers.

Twelve years ago; we were supposedly near the end of a 90% nose-dive in silver inventories, where inventories fell by roughly 130 million ounces per year. Those inventories certainly wouldn’t have fallen at such a precipitous rate if there was a “surplus” in the silver market during those years. This relentless plunge in inventories represents another long stretch of supply deficits, which (according to the chart above) date back to 1990. Suddenly, the consecutive deficits in the silver market stretch to 25 years, a full quarter-century.

Arguably, however, even a quarter of a century of consecutive supply deficits in the silver market is still likely an understatement. Before addressing that argument, it’s important to note the supposed turnaround in silver inventories which the previous chart indicates. It never happened.

As has been explained in a number of previous commentaries; it was in 2005 that the bankers came up with one of their largest, and most-notorious frauds in precious metals markets, their so-called “bullion-ETF’s”. As one aspect of this fraud, they began pretending that the “units” (of silver) in these funds, the property of investors, represented additional “inventory” in the silver market.

The Big Banks (and primarily JPMorgan) claim to be holding the silver purchased by investors in these funds, as trustees. At the same time; we’re told that this same silver is an “inventory”, i.e. available for purchase. In the real world; when a person buys an ounce of (physical) silver, inventories decline by one ounce. In the paper fraud world of the bankers; when someone buys an ounce of silver (via a bullion-ETF), inventories increase by one ounce.

Along with that analysis, we have the additional evidence presented at the beginning of this commentary. From 2005 to the present, the silver market has remained in deficit, officially, while global demand (especially in India) has been rabid, and while China has gone from being a large supplier of silver to a large, net-buyer.

In 2005; the world was nearly out of silver. The market has remained in deficit, every year since. At the “burn rate” shown in the chart above; the world would have run out of silver some time in 2007. So where is (was) the default?