The (phony) price for silver in the paper futures market continues to plummet to even more absurd levels. For the world’s most sophisticated precious metals consumers, this translates into a single message: buy
Today, the price of silver is hovering just above $12 per ounce. This has pushed the gold/silver price ratio to a new all-time extreme – approaching 125:1.
Because of the abysmally ignorant reporting on the silver market in North America, few investors will even understand the significance of this insane perversion of the price of silver.
For over 4,000, the gold/silver price ratio hovered around 15:1. This reflects the natural supply ratio of the two metals in the Earth’s crust (17:1) with humanity having a slight preference
for silver over gold (relative to supply).
Today, in real dollars, the price of silver currently hovers near a 600-year low
, while (thanks to the destruction of silver stockpiles and inventories) the supply of silver has also never been so precariously low.
supply are simultaneously hovering near multi-century lows. The ultimate perversion of supply/demand fundamentals.
Renowned silver researcher/analyst, Ted Butler, calculates that the above-ground supply of gold actually exceeds silver today
– by several multiples.
…So, 60 years ago, there was ten times more silver in inventories as there was gold. Gold was more rare than silver throughout recorded history. For thousands of years we mined many more ounces of silver than we did gold. No wonder people believe that gold is still rarer than silver; for most of history, it was. But that was then, and this is now. Something absolutely remarkable occurred over the past 60 years that turned the old equation on its head. We went from having ten times more silver than gold, to having four times more gold than silver.
In 4,000+ years, the price of silver has never been so divorced from supply/demand fundamentals.
However, while North American investors know virtually nothing about the silver market, there is
a (massive) population of silver-buyers with an extremely shrewd understanding of silver: India’s peasant population.
North American investors are fed the myth (and believe it) that silver is now “an industrial metal”. Indian peasants understand that silver has always and will always be a precious metal – and money
India’s peasant class lacks access to banking services, but they couldn’t care less. Indian peasants wear their savings around their necks, in the form of wrought silver (and gold) jewelry.
In 2018, India imported roughly 1/3rd of all the silver produced in the world. In India alone, 1/3rd of all the silver produced in 2018 was used as money
Silver is an “industrial metal”? Right. Try telling that to the (real) experts on precious metals. However, there is a further lesson to be gleaned from looking at Indian silver demand in 2018.
In the second half of 2018, the price of silver fell precipitously, from close to $17 per ounce down to nearly $14 per ounce. And Indians went on a silver-buying rampage
India, which mines virtually no silver itself, imported roughly 280,000,000 ounces of silver, just under 8,000 tonnes. But that wasn’t even a record year for Indian silver imports.
To find that previous record (and understand it) requires looking at an even longer-term chart of the silver market.
In 2015, the price of silver made a similar move to 2018 – except the price started falling even sooner in the year and stayed low for longer.
The result? Indian silver imports hit an all-time record of 8,504 tonnes. In that year
, India imported over 30% of all the silver and gold mined on the planet
India is the global capital for precious metals. Indians are the world’s most price-conscious precious metals buyers. And when gold or silver goes on sale, Indian bullion-buying goes ballistic.
Flash forward to 2020. The spot price of silver is not at $17 per ounce. It’s not at $14 per ounce. It’s at $12 per ounce.
What does that mean? It means that unless the price of silver rebounds sharply and quickly, Indian silver imports in 2020 will shatter all previous records.
Indians (and especially Indian peasants) are currently buying silver with both hands. Indeed, with the price of silver having never
been at such an artificial extreme in over 4,000 years, we are seeing unprecedented developments in the physical market for silver.
Yesterday, we alerted readers to an historic event in North America
. The price for physical silver decoupled
from the phony paper futures market. Prices for real metal were (are) roughly double the artificial price for paper silver.
Now, even in India’s massive and liquid silver market, the price for physical metal is also beginning to decouple from phony paper prices.
The current “spot” price for silver in India
equates to roughly 34,000 rupees per 10 grams of silver (the standard buying unit). But the actual price to purchase silver is 41,780 rupees per 10 grams.
This translates into a “premium” of over 20% to acquire silver in India today. This is virtually unprecedented in India.
As recently as November 2019, when silver was trading at $17 per ounce
, Indians could purchase silver at 39,000 rupees per 10 grams.
This is worth restating. Four months earlier, when the global spot price was 40% higher, Indians could acquire silver for a lower
price than today.
This tells us that one or both of the following must also be true:
- The supply of silver is so close to being exhausted that Indian dealers are able to extract the highest premiums in history (from eager buyers)
- Indian bullion dealers are convinced that the spot price will rise dramatically in the near future and simply refuse to capitulate to the current (artificial) paper price for silver
If (1) is true, this implies a near-term default in supplying the global silver market
as the artificially low price generates a run on dwindling inventories.
If (2) is true (and dealers are right), we are about to see the price of silver rebound dramatically, irrespective of (1).
And if (1) and (2) are true? We are about to see the price of silver rise dramatically, but (with inventories at such critical levels) we could still see a supply default.
What happens if there is a formal default in supplying silver, with silver being a critical input in numerous industries? You can (immediately) add a zero to the silver price
. And doing so (while leaving the price of gold unchanged) would roughly restore balance to the gold/silver price ratio.
In 2008, when the price of silver was also taken down to a ridiculous level, there was virtually no physical silver available for sale except for (illiquid) 100-oz bars. By silver now…while you still can.