Silver Will Be in a Severe Supply Shortage by August 2012
Placing my a** hat on the table in front of me, I predict that silver will go into a severe supply shortage by August 2012 or sooner.
Greek sort of got bailed out, leaving the price of silver to float upwards as opposed to downward should central banks and private owners need to dump PMs to get liquidity.
Absorption of silver continues apace with speculative and aggressive longs outnumbering shorts two to one.
The discount to real silver value will not go unnoticed for long. Sovereign wealth funds in China and Middle East have over $2 trillion in funds ready to deploy. War brings out the best in wealthy buyers. They buy for safety when the chips are down and financial insecurity abounds.
The physical silver is being held for personal investment and industrial and commercial purposes. Miners are holding supply hostage to buyer requests to avoid the taxes on the profits of their silver sales.
The numb-nuts at EPA are stopping mine production due to environmental issues.
Miners are starting continent-wide strikes in Africa for gold, silver, platinum and palladium.
Nearly 100 million ounces were kept from the market in those recent strikes.
Nationalization of silver mines continues apace in south and central America.
Thanks to The Doc for getting the price of 100 ounce bars down so low I could not resist another purchase. I topped up on those 100 oz bars Friday. That took about 100,000 ounces of paper silver (1,000 oz of real phyzz) out of the physical supply.
I found a new hidey hole.
Kid you not.
I plan to put a few in small colored plastic boxes like Tupperware(R) and hide them in plain sight.
But back to silver supply.
In another four months I expect that silver supplies to hit crunch time.
High costs of extraction due to skyrocketing fuel prices. Diesel could go to $9 a gallon. Economic slowdown reduces demand for zinc, lead and copper (silver being a byproduct). Mines are buttoned up due to extraordinary costs of production.
Rapid buying of silver by Asian central banks and sovereign wealth funds.
Since silver is a strategic metal used in vital communications and weapons manufacturing, and war with Iran is a certainty, this demand for silver will get very interesting. We have not had a war in which strategical metals was in critical shortages. But we do now and our purported allies are not quite so friendly to us now.
The lack of this strategic metal will curtail the war efforts. China and Russia doing anything they can to strip-mine silver from the supply chain will cause us to use our already depleted inventory of war materiel, soon finding ourselves unable to replace these silver-laden items.
Without firing a shot they will effectively round up supplies to hamper our efforts. China has a lock on over 90% of the rare earths too boot.
Do I have exact numbers on each of these factors?
But with about 700 million ounces of silver available in a year, 200 million ounces coming from scrap, the US producing less than 10% of the entire world's annual supply.
That is the key figure. We have less than 10% of the world's annual supply and things are going to get sticky real quickly. Plus it would be an idea time to help move the US Dollar further off its reserve status.
The reason I chose August 2012:
Israel has about 3 months before it has to get moving on its attack on Iran.
$3 trillion in new money for Euro Bank bailouts will wash across the Atlantic to the perceived safe harbor of the dollar, flushing up prices in the US.
ZIRP created gross mis-allocation of assets chasing yields, safe or not. PM safety will be quickly seen as a great place to be.
Inflation of 10% will become 15-20% and the US and Euro consumers will scream for a shield against this inflation. Where do they go?
Where anyone trying to safeguard themselves goes: Physical precious metals
Gold is being shipped east at discount prices. When the COMEX is marginalized by physical demands, like the recent 3 million ounce order, gold prices will bounce and silver prices will race upwards, hugging the backside of the Golden Jackass (Thanks Dr Willie for your recent insight)
Like Brother John said, if even 1 tenth of one percent of SWF goes to silver, 200% of the world's annual supply of silver will be up for grabs immediately.