How The Silver Shortage Will Unfold

[WallyWeaver]

Even though this article was sent to me by my precious metals broker I still found it interesting. If you have any interest in investing in silver you might find it interesting also.

How The Silver Shortage Will Unfold

Tehmaas S. Gorimaar

25 September 2011

When examining the present situation in silver, what everyone needs to know, first and foremost, is that technical analysis is an exercise in futility in a manipulated market. I am sure the technical bears will claim success this week, but don't mistake occasional, timely calls for sagacity. The silver market, because of its limited supply from above-ground sources and excessive manipulation, must be examined from a fundamental standpoint. It's all about paper versus physical.

Every bull market is different, and history only offers us signposts to a path in the future, but rarely repeats itself in an identical manner. This is so because the circumstances surrounding each bull are different.

Most precious metals bull markets are characterized by gold's leading the way, and silver's following. So far, our current bull has developed in a similar fashion, with gold's leading the way. Now, however, we may have reached an inflection point that may cause silver to rocket because of the confluence of certain situations and events.

We all owe deep gratitude to Ted Butler and others whose monumental research, over decades, has exposed the great silver fraud, and shown us that there is less than one billion ounces of above-ground silver available today.

Because of this special situation in silver, you need to know that central banks, in general, and the Federal Reserve, in particular, are creating conditions that will compress the time at which the great silver shortage will start. Here's how.

The greatest demand for physical silver - a little over half of the total - is coming from China and India. In this article, I shall address what is going on in India; and, perhaps, someone else can write a complementary article on the silver market in China.

About two-thirds of total Indian silver demand comes from the rural area. In rural India, silver is almost the sole form of savings, since gold is now affordable to only a few. Let us assume, conservatively, that the average Indian farmer manages to save the rupee equivalent of $100 in a good harvest year. Yes, let's assume just $100. There are almost 250 million farmers in India. Supporting these farmers and their families are rural businesses that mostly take the form of mom-and-pop stores. Add all this up, and the total agrarian population is around 800 million. Let us assume that each one of these folks saves $100 a year, under favorable harvest conditions. There is a great distrust of banks among rural Indians; so let us assume that, at least, 300 million people, out of the total rural population of 800 million, will put their individual savings of $100 this year (India has had a good monsoon this year) into silver. (Gold, simply, has become unaffordable to the rural community, and is being purchased, in significant amounts, by the wealthy and upper middle classes). This gives us a total savings pool of $30 billion. At $30 per ounce, it is possible that the entire above-ground supply of silver could be gone this winter, courtesy of the Indian rural population, all by itself. If silver falls to $20 per ounce, the average Indian villager is going to scream with delight when he discovers how much more silver his rupees are going to buy.

I shall go out on a limb and say that the shortage of physical silver that we saw last April will be magnified, several fold, this time around. And, if anyone wishes to challenge the fact that the shortage of physical silver last April (before the brutal collusive actions by the bullion banks and the COMEX) was real, all you have to do is go to the archives of Indian newspapers like The Business Standard, The Financial Express and The Economic Times to read these stories.

I, personally, was on the phone, almost every day, last April, to keep track of events as they were unfolding in India. For the greater part of the month, India's two major, silver refineries had stopped working, altogether, because of a shortage of raw material, and the only silver that was being traded was scrap. For this reason, the price premium of silver bullion in India during that period fluctuated, roughly, between $2 and $3 per ounce over the COMEX price.

Fortunately for us, Benny the Bubble Blower has come to our rescue. By driving down the price of silver to $30, he has made it far more affordable to the hundreds of millions of rural folks in India, and all across Asia. By this one, monumentally mindless act of his, at least from a central banker's perspective, he will have managed to let hundreds of millions of people scoop up the remaining above-ground silver supply over a period of a few months. The villagers of India, I am sure, have never heard of Ben Bernanke, and couldn't care less if he did not exist. They only know one thing: that gold and silver are the only forms of money, and, if this money is available at a much lower price in terms of paper promises, they will grab as much of it as they can. As far as they are concerned, this is the great, annual Macy's super-sale event, and they will be buying with both hands. That much is guaranteed. After all, this is their savings account. Just imagine how you would feel if you walked into a bank with $1000 to open an account, and the bank said that they would credit your account with$1500, or some such amount. You'd want to open a thousand accounts that day. Well, that's what Bernanke has done for the villagers of India, and for the rest of us. Incompetence of this degree, and on this grand a scale, is hard to find anywhere. Don't look this gift horse in the mouth.

Another trend in silver's favor is that it is now acceptable to include silver in an Indian dowry without provoking derision, because of gold relentless rise over the last several years. Moreover, I have read statistics to the effect that there will be 12 million weddings in India this year, as opposed to 10 million last year. (I have not been able to confirm these numbers, independently, though).

Now try and project the hundreds of millions of people from China, Indonesia and the rest of Asia that will participate in this bull, and, well, you get the picture.

Once this physical shortage manifests itself by early 2012, you can rest assure that all the momentum players, a.k.a. the big money in hedge funds, will pile into it. There may also be a few, large pension plans looking for real returns who may enter this miniscule market. And once the silver users get wind of the shortage, it will be impossible to make price projections on silver.

George Soros may have been slightly off-target when he said that gold is the greatest bubble. It may well be silver. Don't be denied your share.

[tyron]

A bubble is usually caused by people borrowing to buy an asset (one that they perceive to be appreciating quickly) that they can't really afford. With the exception of gold and silver bugs both metals have been kept at such unattractive prices that any bubble theory is laughable at best and malicious at worse.

[zigmeister]

Do I understand this correctly, silver is going to boom in early in 2012, I mean really boom?

[tyron]

Do I understand this correctly, silver is going to boom in early in 2012, I mean really boom?

Could be Zig, but keep it longer still and see what happens. Could even turn out to be the 'greatest investment' of the century. Definitely get some if you can Zig.

[zigmeister]

Could be Zig, but keep it longer still and see what happens. Could even turn out to be the 'greatest investment' of the century. Definitely get some if you can Zig.

I do, but I need more. Actually we gave our kids silver dollars last Christmas, and they looked at us, like what? Since then we add more when we can.

[make11]

That was a great article about silver, thank you very much.

I believe that Silver will be the investment of this decade (or 2nd best hopefully after our dinars).

Anyway I am fully convinced that silver go to at least multiple hundred dollars per ounce in the next few years.

[WallyWeaver]

Do I understand this correctly, silver is going to boom in early in 2012, I mean really boom?

Keep in mind that this article was sent to me by my broker (they obviously have an interest in me buying more from them). But yes, by early 2012 we could see silver really start to get interesting. But as tyron stated, I don't think it will hit its peak in early 2012. The USD still has a lot of inflating to do.

I just thought this article gave an interesting take on how the current price drop in PM's is going to backfire by causing a supply shortage. Which will ultimately lead to the price of silver going through the roof!

So, to all of my friends here on DV, in my humble opinion, try to get a hold of as much silver as you can right now. It will probably not be priced this low in USD's again....

That was a great article about silver, thank you very much.

I believe that Silver will be the investment of this decade (or 2nd best hopefully after our dinars).

Anyway I am fully convinced that silver go to at least multiple hundred dollars per ounce in the next few years.

Thanks for the comment and I agree with you 100%!

As long as the USD is around I don't think it is unreasonable to think that silver can hit $500/ oz.

[zantac]

This article has been floated around for about 2 years by different investment so called mega know it all GURUS

Its rubbish, silver is worth only what manufactures will pay for it, surgical instruments, cell phones to mention a few but for the small investor forget it already.

To invest in silver to make a huge profit you would need around $2 million, 5 years, a massive storage facility, huge security & whole lot of faith

[WallyWeaver]

This article has been floated around for about 2 years by different investment so called mega know it all GURUS

Its rubbish, silver is worth only what manufactures will pay for it, surgical instruments, cell phones to mention a few but for the small investor forget it already.

To invest in silver to make a huge profit you would need around $2 million, 5 years, a massive storage facility, huge security & whole lot of faith

Thanks for your comment! I will have to disagree with you, though.

There are a number of factors that point to silver having a tremendous increase in value when compared to fiat currencies.

1. The USD will mostly likely move into hyperinflation, and soon, due to all of the recent money printing. The last time we saw the dollar hit heavy inflation (1980) silver hit $54/ oz. This is the highest silver has ever been priced in USD's. Just with the hyperinflation factor alone silver will easily go over $100/ oz. But if the USD loses its World Reserve Currency status then silver will explode upward as the dollar tanks.

2. There is only so much above ground silver out there. While it is true that the price of silver is heavily manipulated as the different fiat currencies of the world begin to tank investors will flock to "real" commodities like gold and silver to protect their wealth. This will cause silver to go even higher. It's simply supply and demand.

This is why I think that silver will hit $500/ oz. But, this is just my opinion. Anyone can disagree with it.... that just means more silver for me!

[tyron]

This article has been floated around for about 2 years by different investment so called mega know it all GURUS

Its rubbish, silver is worth only what manufactures will pay for it, surgical instruments, cell phones to mention a few but for the small investor forget it already.

To invest in silver to make a huge profit you would need around $2 million, 5 years, a massive storage facility, huge security & whole lot of faith

Naturally I agree with WW, but out of curiosity is there any coherent reason you picked the figure of $2 million, Zantac?

[zantac]

Naturally I agree with WW, but out of curiosity is there any coherent reason you picked the figure of $2 million, Zantac?

Yes there is

If you should wish to invest in silver to gain a profit or margins that this post suggest you will need this amount or more to profit in the very near future, if you wish to purchase silver now on a small holding basis by the time you have enough to think you have a sound investment you would have paid far to much over 5 years to have a realistic gain for your efforts & time based investment.

It’s the same old story once the fire starts & the wind picks up in the end the fire gains so much pace it runs out of things to burn hence it will just burn its self out.

Gold is different as everyone wants in, silver is just a trend that once its flooded it will just peak & flow away like the flooded river we see many times in the winter months.

Wally Weaver has a point in some manner but history very rarely repeats it self in such a manner & I would also like to point out that anyone that post in red text should not be taken seriously at all.

Its very rude to address any manner of correspondence in red let alone to argue your case in this manner

[WallyWeaver]

It’s the same old story once the fire starts & the wind picks up in the end the fire gains so much pace it runs out of things to burn hence it will just burn its self out.

Gold is different as everyone wants in, silver is just a trend that once its flooded it will just peak & flow away like the flooded river we see many times in the winter months.

Wally Weaver has a point in some manner but history very rarely repeats it self in such a manner & I would also like to point out that anyone that post in red text should not be taken seriously at all.

Its very rude to address any manner of correspondence in red let alone to argue your case in this manner

Thanks for the attack, I am really not sure what warranted it.

But here is something for you: nice use of analogies, how about some facts?

Here's a nice quote about analogies:

"Analogies prove nothing, that is true. But they can make one feel more at home."

Sigmund Freud

I will give it to you, you seem right at home with your use of analogies!

Writing in red is offensive... really?

So your retort is to use a bunch of analogies (that prove nothing) and then you bash the color of my writing? Nice...

Do some research into how much money was printed over the last three years. Do you understand the concept of inflating a fiat currency? Do you understand the precarious position the Fed has put us in? Does supply and demand mean anything to you?

[tyron]

Yes there is

If you should wish to invest in silver to gain a profit or margins that this post suggest you will need this amount or more to profit in the very near future, if you wish to purchase silver now on a small holding basis by the time you have enough to think you have a sound investment you would have paid far to much over 5 years to have a realistic gain for your efforts & time based investment.

It’s the same old story once the fire starts & the wind picks up in the end the fire gains so much pace it runs out of things to burn hence it will just burn its self out.

Gold is different as everyone wants in, silver is just a trend that once its flooded it will just peak & flow away like the flooded river we see many times in the winter months.

Wally Weaver has a point in some manner but history very rarely repeats it self in such a manner & I would also like to point out that anyone that post in red text should not be taken seriously at all.

Its very rude to address any manner of correspondence in red let alone to argue your case in this manner

Dear Zantac,

Silver is not a trend but a disappearing asset. You don't need 2 million to invest in it. In fact, the beauty of silver is that anyone can afford to invest in it. I certainly don't have 2 million to spend on silver! But i buy and will buy as much silver and gold as I can lay my hands on. The fundamentals of both are strong but silver has more potential to sky-rocket.

In order to keep fiat attractive the price has traditionally been clamped down hard, but shortage and demand to the rescue, and in the last few years there has been movement in the market that clearly shows the nails are no longer secure and the PTB are struggling to keep its price down. I urge you to do some research or you might miss out on what could be one of the best investment opportunities of this century. Remember every clue in today's world tells you clearly there is a plan to take down fiat currencies and replace them with a global one backed by metal. You want to be holding metal when that happens. The first link should take you to Mexico (a test cast perhaps) and its proposed new silver currency. Take care Z.

http://www.thebullandbear.com/articles/2010/0710-Silver.html

http://acrossthestreetnet.wordpress.com/2011/04/14/why-silver-is-still-the-best-revenge/

http://www.financialsense.com/contributors/ryan-jordan/2011/09/28/peak-silver

http://www.silver-investor.com/charlessavoie/essayofthemonth.pdf

[WallyWeaver]

Dear Zantac,

You want to be holding metal when that happens. The first link should take you to Mexico (a test cast perhaps) and its proposed new silver currency. Take care Z.

Thanks for taking a soft approach T.

I probably got a little carried away.

+1 to you for civility!

[tyron]

Thanks for taking a soft approach T.

I probably got a little carried away.

+1 to you for civility!

When I am walking in the streets W, I find I derive a great deal of pleasure from the little children in their bright, mismatched colours. It is truly one of the unappreciated joys of life. May this world always be bursting with colour.

[WallyWeaver]

When I am walking in the streets W, I find I derive a great deal of pleasure from the little children in their bright, mismatched colours. It is truly one of the unappreciated joys of life. May this world always be bursting with colour.

As long as you consider yourself as one of the little children, and not above us. Otherwise your statement comes off as a little condescending.

I checked out the book you recommended by John Taylor Gatto and found that he wrote several books in the same vein. I will definitely order at least one of them either today or tomorrow; two of them look very interesting. It's between "Dumbing us Down: The Hidden Curriculum of Compulsory Schooling" or "The Underground History of American Education: A School Teacher's Intimate Investigation into the Problem of Modern Schooling." Heck, I may end up ordering both of them, eventually.

I'm also looking at "Building Wealth With Silver" by Thomas Herold... have you heard of it? If so would appreciate your opinion on it. I will probably order it with Gatto's book.

[tyron]

As long as you consider yourself as one of the little children, and not above us. Otherwise your statement comes off as a little condescending.

I checked out the book you recommended by John Taylor Gatto and found that he wrote several books in the same vein. I will definitely order at least one of them either today or tomorrow; two of them look very interesting. It's between "Dumbing us Down: The Hidden Curriculum of Compulsory Schooling" or "The Underground History of American Education: A School Teacher's Intimate Investigation into the Problem of Modern Schooling." Heck, I may end up ordering both of them, eventually.

I'm also looking at "Building Wealth With Silver" by Thomas Herold... have you heard of it? If so would appreciate your opinion on it. I will probably order it with Gatto's book.

My statement was solely referring to your use of red ink W. I think it an original, carefree, burst of colour like the children in the street. Talk-down was the last thing on my mind. To the contrary. Carefree bursts of colour are special and must be guarded, and nurtured at every opportunity.

In this age of videos and TVs, you're quite the reader, aren't you?

No, Thomas Herold is a new one for me. What made you decide on his book? Was it the title? Or?..

[WallyWeaver]

My statement was solely referring to your use of red ink W. I think it an original, carefree, burst of colour like the children in the street. Talk-down was the last thing on my mind. To the contrary. Carefree bursts of colour are special and must be guarded, and nurtured at every opportunity.

In this age of videos and TVs, you're quite the reader, aren't you?

No, Thomas Herold is a new one for me. What made you decide on his book? Was it the title? Or?..

Okay, I thought as much. Sorry for the misunderstanding.

I just did a search on Amazon Books for investing in silver/ precious metals and his book seemed like the most interesting. After reading the overview it seems like he hits on a lot of the topics we discuss here often, especially the explosive potential of silver. I'll check it out and give some feedback.

Thanks, Tyron, for your pleasant demeanor here on DV. Thanks again for clearing up my misunderstanding.

[tyron]

Okay, I thought as much. Sorry for the misunderstanding.

I just did a search on Amazon Books for investing in silver/ precious metals and his book seemed like the most interesting. After reading the overview it seems like he hits on a lot of the topics we discuss here often, especially the explosive potential of silver. I'll check it out and give some feedback.

Thanks, Tyron, for your pleasant demeanor here on DV. Thanks again for clearing up my misunderstanding.

No problems W. Always a pleasure talking to you. Will look forward to the feedback.

[WallyWeaver]

There's no target date. But the prospect is awesome. Forget gold.

Welcome to the discussion E.! +1 for good points. I think you prefer negs., from what I've read on other posts of yours, but I couldn't help myself. Sorry about that.

As far as your stay away from gold point... I came across something interesting yesterday. In 1933, when the US government confiscated the gold of the citizens, rare gold coins were not included in that confiscation. So, I suppose if you have rare gold coins you will be okay. Other than that, though, and you will probably be subject to confiscation:

It was on April 5, 1933 when then President Roosevelt, acting under the sweeping authority passed to him by Congress on March 9, invoked his authority to make it unlawful to own or hold gold coins or bullion. Here’s what the Executive Order actually said:

UNDER EXECUTIVE ORDER OF THE PRESIDENT, issued April 5, 1933, all persons are required to deliver ON OR BEFORE MAY 1, 1933 all GOLD COIN, GOLD BULLION, AND GOLD CERTIFICATES now owned by them to a Federal Reserve Bank, branch or agency, or to any member bank of the Federal Reserve System.

Executive Order FORBIDDING THE HOARDING OF GOLD COIN, GOLD BULLION AND GOLD CERTIFICATES.

By virtue of the authority vested in me by

Section 8( of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled "An Act to provide relief in the existing national emergency in banking, and for other purposes", in which amendatory Act Congress declared that a serious emergency exists.

I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States...except the following...

(section 2B)...gold coins having a recognized special value to collectors of rare and unusual coins...

Whoever willfully violates any provision of this Executive Order or of these regulations or of any rule, regulation or license issued thereunder may be fined not more than $10,000, or if a natural person, may be imprisoned for not more than ten (10) years, OR BOTH; and any officer, director, or agent of any corporation who knowingly participates in any such violation may be punished by a like fine, imprisonment, or both. This order and these regulations may be modified or revoked at any time.

FRANKLIN D. ROOSEVELT The White House April 5, 1933.

[dacraigo]

Anybody want to buy 55 ounces through paypal, make someone a REALLY good deal?

[The Machine]

Anybody want to buy 55 ounces through paypal, make someone a REALLY good deal?

How much of a good deal are you talking about ...... $????

[dacraigo]

How much of a good deal are you talking about ...... $????

Half of spot so $850 plus shipping, I buy bulk lots of coins so I have silver all the time if interested send me a PM.

[F-16Pilot]

Half of spot so $850 plus shipping, I buy bulk lots of coins so I have silver all the time if interested send me a PM.

Is that 55 oz in coins or bars? If coins, which one(s) and what is the purity of them?

[dacraigo]

Is that 55 oz in coins or bars? If coins, which one(s) and what is the purity of them?

Coins from various countries, .800-.900 majority .900