Saturday, July 16, 2016

Silver Prices Are Ripe For An Increase (As They Always Were)

There are three places in the world where the biggest amount of silver is stored. These places are:

  • London Bullion Market
  • Shanghai Futures Exchange

Of these three vaults, only COMEX and Shanghai deliver data on their stocks. 

When you look at COMEX and Shanghai data, one thing should be noticed - since the end of 2015 the Chinese have been very wildly accumulating silver:

source: Simple Digressions and Shanghai Futures Exchange

Another interesting thing - since the beginning of 2015 the biggest silver player at COMEX, JP Morgan, has been wildly accumulating silver as well. 

However, it looks like it is Shanghai that is going to win this race:

It should be spotted that both players, JP Morgan and Shanghai, now hold nearly the same amounts of silver. However, if Shanghai continues accumulating silver at the rate it has been doing that since the end of 2015, it should outpace JP Morgan soon. 

What does it mean?

Well, firstly, look at the gap between the world supply of silver and the demand for it:

source: Silver Institute

The chart shows that since 2006 the demand for silver was always higher than its supply. 

To be honest - due to this fact there should have been no huge correction in silver prices. As everyone knows, between 2012 and 2015 silver prices corrected significantly - they went down from around $48 to $13 per ounce. Why? I have no idea but let me say that between 2012 and 2015 it was mass psychology that won. Fundamentals were losers (I know it is a little bit funny explanation but if any of my readers has better theory - feel free to comment)

However if markets are driven by the relationship between demand and supply, it is the highest time for silver prices to go up. It looks like the Chinese and JP Morgan try to position themselves to take part in this ride...

1 comment:

  1. Having experienced the bear market in PMs I can say most stackers are conditioned to expect lower prices with each major dip Never sold the physical metals myself and kept accumulating all the way down for the major payback to come Looks like my bets are now paying off