I’m already on record as declaring 2020 as the most significant year ever for silver. Considering all that has transpired this year throughout the country and the world that may not be saying much. After all, you would have to have lived on a different planet to argue otherwise. So let me get a lot more specific and lay out the most important statistics that make this year so significant for silver. As always, I’ll rely on both hard and widely-accepted data, and will round off the numbers to make it easier to follow. I will not attempt to introduce any insider information (mainly because I’m not privy to any such information).
By far, the most important silver statistics concern the inflow of some 400 million oz of physical metal into the world’s silver ETFs and into the COMEX silver warehouses, from roughly March 16 thru the end of July. Over little more than four and a half months, 330 million oz came into the world’s silver ETFs (220 million oz into the largest silver ETF, SLV), with 70 million oz coming into the COMEX warehouses (of which 30 million oz came into the JPMorgan COMEX warehouse).
Before explaining why I believe this 400 million oz inflow of physical silver was the most remarkable development of the year, let me acknowledge that there was also a very large physical inflow of gold into the world’s gold ETFs and the COMEX gold warehouses as well. Not only was the mix different than in silver, in that the roughly 60 million oz of physical gold inflow was evenly divided between the gold ETFs and the COMEX warehouses (30 million oz each), but the total gold inflow increased the total number of ounces in the gold ETFs and COMEX warehouses by 60% to 160 million oz, whereas the 400 million oz total physical silver inflow increased total ETF and COMEX warehouse totals by “only” 36%, from 1.1 billion oz to 1.5 billion oz.
Moreover, the 60 million gold ounces were worth well over $100 billion, whereas the 400 million ounces of physical silver were worth “only” $7 billion (at the prevailing prices at the time of the inflows). So where do I get off claiming that the inflow of 400 million oz of physical silver is the most remarkable statistic of this most remarkable year? It has to do with how much gold and silver exist in the world in bullion form.
In gold, there are 3 billion ounces of bullion in the world (out of a total of 6 billion oz in all forms). The 60 million oz of gold bullion that flowed into the world’s ETFs and COMEX warehouse inventories, therefore, represent 2% of the total amount of gold bullion in the world. In silver, the 400 million oz of physical metal that flowed into the world’s ETFs and COMEX warehouse inventories represent 20% of the 2 billion oz of world silver in bullion form (all in 1000 oz bars). There is a very big difference between 2% and 20% - a tenfold difference. Wait, I’m not finished.
The 160 million total oz of documented gold now in the world’s gold ETFs and COMEX warehouses represent just over 5% of the 3 billion oz of gold bullion known to exist. In silver, the 1.5 billion ounces in the world’s silver ETFs and in the COMEX warehouses represents 75% of the 2 billion total silver bullion oz said to exist. There is an even bigger difference between 5% and 75% - a 15-fold difference.
I’m not saying that there’s not more than 2 billion ounces of silver in the world in all forms - I’m sure there is. I’m saying that there are only 2 billion oz in industry standard good delivery 1000 oz bars and three-quarters of that silver is in the world’s ETFs and in the COMEX warehouses. Converting whatever silver that exists outside the 2 billion oz in 1000 oz bar form will take time, great gathering and processing expense and the willingness of those holding other forms of metal to sell – not something currently occurring or likely to occur in the absence of sharply higher prices.
At this time and price, 75% of all the silver bullion thought to exist is locked up in the worlds publicly-traded ETFs and COMEX warehouses, leaving only 25% as conceivably available (if the owners are willing to sell). No knock on gold intended in any way, but roughly 5% of the gold bullion in the world is locked up in ETFs and COMEX inventories, leaving 95% of the remaining gold bullion technically available. Plus, on a realistic basis, much more gold held in non-bullion form is likely to come to market at current prices than equivalent dollar amounts in silver.
It becomes even more remarkable when you think about 400 million oz of documented silver bullion suddenly coming into the world’s silver ETFs and into the COMEX warehouse inventories, in little more than 4 months. That’s the equivalent of 50% of annual world mine production (yes, the same could be said about gold mine production, but not existing gold inventories). Remember, silver is an industrial commodity and as such the vast majority of its annual production is used up in various industrial and other fabrication consumption, meaning no pricing model would ever allow for the equivalent of 50% of annual mine production to suddenly be taken away without a many-fold increase in price. Yet from mid -March to mid-July, the price averaged little more than $17 an ounce (prices only rose above $20 in the latter half of July).
In fact, it is the still-subdued price reaction to the documented 400 million oz inflow that makes this statistic so remarkable. Even more remarkable is that few, if any, commentators even mention it. How the heck do you suddenly move the equivalent of 20% of total world inventories or 50% of the annual production of any industrial commodity in a matter of a few months without that commodity literally exploding many times in price? In normal and free market supply/demand terms, what I just described in silver would be impossible in any other industrial commodity. Therefore, something is very wrong – either all the data from the world’s silver ETFs and from the COMEX are all wrong and are being deliberately misreported or something is wrong with the silver pricing mechanism.
I know many believe the former, namely, that all the data are being deliberately reported wrong. The problem with that is that it makes no sense for entities like BlackRock (sponsor of the SLV) which happens to be the world’s largest money manager and other ETFs (like SIVR, ZKB and Sprott) or the COMEX to intentionally misreport data because there is nothing for any of these organizations to gain and everything to lose. Yes, I’m fully aware of the distrust of many towards the ETFs and, particularly, with the COMEX (much of which I may be responsible for), but data reporting is another matter. I can’t personally guarantee the accuracy of data being publicly reported, but I will say those who insist the data are all wrong generally believe in a wide variety of wacky conspiracy theories and/or have their heads up their butts. No insult intended, this is just how I feel.
So, if the public data being reported concerning 400 million oz of physical silver is accurate, as I firmly believe to be the case, then the only possible explanation for why the price reaction was so subdued has to do with the pricing mechanism. In fact, there can’t be any other possible explanation other than that paper positioning on the COMEX sets the price no matter what is happening in the world of silver (and gold). And it’s not as if any of this should come as any surprise to anyone paying the least bit of attention to silver.
I would suppose I would feel somewhat embarrassed in having to restate the obvious yet again and bore everyone in the process, but the 400 million ounces of physical silver is such a massive amount to have flowed into the ETFs and the COMEX warehouses in such a short period of time that I would think it would be all everyone was talking about. It certainly should be what everyone is talking about. However, I see very little commentary about this most remarkable and verifiable statistic and discussion instead about everything under the sun that doesn’t really matter. Therefore I have to conclude the data are being overlooked or misunderstood.
But what could be more important than the largest amount of physical silver ever flowing into the world’s ETFs and COMEX warehouses in the relative blink of an eye? Having studied silver closely for more than 35 years, either I am missing something or a lot of other people are. I suppose if one adopts the position that all the public data are corrupt and intentionally misleading then the data should be ignored – but I’m not in that camp at all. And those that do believe all the data is corrupt should not turn around and cite selected instances of the data when it suits them.
The biggest question, of course, is where the heck did all this silver come from? On Wednesday, I commented on the role of JPMorgan in everything silver (and gold) and that certainly includes the inflow of the 400 million oz of silver (as well as the 60 million oz of gold). Generally, everything I’ve stated to this point is verifiable fact, but since no one can see behind closed doors or what’s on others’ minds and uncover information deliberately left unstated, some speculation is needed at some point to complete the picture. JPMorgan is hardly going to openly admit to its manipulative role in all this, so certain things must be deduced.
For one thing, having reported for the past seven years about JPMorgan’s accumulation of physical silver and gold to the exclusion of any other large entity, only JPMorgan was capable of providing the 400 million oz that recently came into the world’s silver ETFs and into the COMEX warehouses. The only real question was the manner by which JPM “parted” with the metal. Looking at it through the eyes of these criminals, one is forced to conclude the parting had a real catch that favored the bank – for the simple reason that every single thing this bank ever does it does for its own benefit. That’s why I switched back to my original speculation that JPM largely leased out much (300 million oz) of the silver that found its way into the EFTs and COMEX warehouses – thus benefitting JPM and its affiliates and causing great potential additional harm to the big shorts.
Of course, this is my speculation and anyone is free to come up with an alternative explanation for the remarkable inflow of 400 million oz. But as I’ve said, any talk of the documented inflow is as rare as hen’s teeth. Regardless, I find the whole set up to be bullish beyond belief. The minute that JPMorgan decides not to assist the 8 remaining big shorts is the same minute the price explodes. Again, no one can predict when that minute will occur in advance, but based upon the continuing flow of documented data, it is a minute that will ultimately arrive.
November 16, 2020