Wednesday, December 7th, 2016 MST

Silver in surplus? Does it matter?

Yesterday, when we emailed the mineweb.com’s article Silver supply seen as in surplus to our Articles of Interest list, I suspected we’d get comments from investors who objected to our “spreading negative information about silver.” Right I was.

The article was a summary of the second issue of The Silver Book, which was compiled by research house VM Group, (formerly Virtual Metals Group), London. VM Group says that the silver market was in surplus in 2007, and they expect the silver market “to remain in surplus this year.” They do not expect a big surplus, but a surplus nonetheless. Read the article for the details.

By sending the article in no way did we endorse its conclusions. Frankly, we have no way of knowing whether the silver market was in surplus or deficit in 2007 and certainly no way of knowing if silver will be in surplus or deficit in 2008. We rely on such annual surveys produced (and sold) by firms as CPM Group, New York, and Gold Fields Minerals Services (GFMS), London. VM Group is new to producing annual silver surveys, and this was only their second effort.

As a side thought, I find it curious that VM Group released their survey shortly after the close of 2007. CPM Group usually does not release its survey until about May, and GFMS usually a few weeks earlier. No doubt about it, the survey released the earliest eats into the sales of the later surveys and usually gets more publicity.

CPM Group, despite having the longest history of doing silver surveys, probably sees reduced sales of its report because the GFMS survey, the other established and anticipated survey, is released a few weeks early. Now, VM Group is publishing a silver survey only weeks after year end. CPM Group takes until May to release their report probably because it takes that long to do a thorough job.

Frankly, we suspect that the VM Group survey has less credibility because of its quick release. CPM Group takes months to compile, assimilate and publish its survey; VM Group does it in weeks. I think the VM Group survey will become less credible than the CPM survey if VM Group continues to publish so quickly after year end.

Still, we sent the article because we believe that our clients are entitled to as much information about the silver (and gold) market as possible, even if that information is negative. All year long, we send articles with positive spins on the silver and gold markets. So, despite our suspicions about the VM Group’s work, we sent the article. (If we had proof that the VM survey were faulty, we would not have sent it. The mineweb.com website, an important source for information about all metals, believed the survey worthy of an article, so we sent it.)


Is the silver market really in surplus?

Frankly, I could care less if the silver market is in surplus. I own gold and silver—and advocate investing in silver and investing in gold as the right moves for the times—because the dollar is in surplus and is never likely again to be in deficit. Practically, there are no limitations on how many dollars the Fed and the fedgov can get together and create.

As this is written, many market analysts are speculating that the Fed will lower its discount rate a half-point today. That, of course, would be on top of the ¾-point cut January 21. The Fed is in full printing mode; rising inflation and a sinking dollar are not today’s problems.

Admittedly, the silver market being in deficit is positive of the metal, but I haven’t stayed in this business for 34 years because of the developing shortage of silver but because I believed that the day would come in my life time that the federal government would attempt to solve all problems by printing more and more dollars. I think that we are there.