➡ The Arcadia Economics video discusses how the Silver Institute recently released a report analyzing the complexity of above ground silver stocks. The report highlights that there’s no direct correlation between the overall level of these stocks and the silver price. It also notes that most of the industrial silver goes directly from the refiner to the user, and increases in bullion stocks often correlate with price increases. The report can be downloaded for those interested in a deeper understanding of the silver market.

➡ David Morgan from themotorreport.com shared some surprising points about the world of silver that may not seem logical. He plans to return next week with more insights.

Many of you know that follow me closely that there was a deficit between 1990 and 2005, 15 straight years where we ate and ate and ate and ate and ate the above ground stockpile. The Morgan Report with David Morgan. Discover how to build and protect your wealth at themorganreport.com. It should be posted maybe later today, Friday or Saturday or early next week. I’ll put that out to our blog and I’ll put it on our Twitter feed as well as our YouTube channel. So having said that, I’m not going to talk much about the Fort Knox audit.

So much has been said and everything I really wanted to say is in that interview. So moving on from that, so what I’m going to do for this weekly perspective is talk about what the Silver Institute put out a couple days ago. And that is this is a summary that we’re looking at. A new report analyzes its complexity of above ground silver stocks and there’s some bullet points here. And if you use my Twitter feed or find it on your own at the Silver Institute, you get this. You get the whole report by clicking here.

There’s a hot link and you get the whole PDF file. I just downloaded it. I have not read the whole thing. But I think some of these bullet points are very interesting and many of you are probably going to be, let’s say triggered maybe is a good word, relative to what some of these high points are. But first one here is there’s no correlation between the overall level of above ground stocks and the silver price. Now a lot of people are going to say that’s hogwash. I believe it and why it’s because of my daily activity basically in the precious metals and of course the resource sector and other things I do, but folks who primarily on the precious metals, particularly silver.

There’s many of you know that follow me closely that there was a deficit between 1990 and 2005, 15 straight years where we ate and ate and ate and ate and ate the above ground stockpile. And that’s in the news now because we’ve had four straight years of eating the above ground stockpile, four years. This went over 15 years. And what happened to the price? You could look, I’ve showed it in previous videos, you could look it up or find it on your own or maybe I’ll do another update. But basically the price stayed flat.

The price peaked in 2011, which is when the inventory started to build back up from 2006 to 2011. So five years as inventory was building is when the price actually continued to go up. So you’re looking at history, that statement’s correct. Annual changes in above ground stocks and the silver price is likewise uncorrelated. This is the mystery of the silver market, but that’s true as well. In contrast, movements in bullion stocks have an impact on the silver price and vice versa. I haven’t read a report, I’m assuming like maybe moving from London to the convex may have an influence.

The vast majority of above ground stocks are immobile with only small net additions or subtractions from stocks on an annual basis. That is true. Most of the industrial silver goes from the refiner direct to the user, direct to the manufacturer, does not pass through convex, does not pass through the LPMA. It goes from refiner to 3M, Tesla, Apple, Dow Chemical, DuPont, you name it, the big users. Increases in bullion stocks are often positively correlated with the price. As investment demand grows and silver prices increase, it stimulates higher prices. Again, going back to what I said a moment ago, the above ground stocks have grown from 2006 through 2020-2021.

So many years of an increase in above ground stock, yet the price peaked again in 2011, as we all know, but it was peaking as the increase of above ground stock prices was increasing. So a lot of this stuff just doesn’t sound right, but this is the silver market. Multiple-year drawdowns and stocks have tended to occur in bear markets for silver and have exacerbated these. However, these drawdowns have typically set silver up for more substantial rallies as investors have rebuilt their bullion holdings. And then the last one, the whole point here, above ground stocks of fabricated products are less price sensitive than those of bullion.

Only specific subsets of fabrication demand show a sensitivity to the price such as jewelry or silverware. Of course, we know that silverware is going to, it’s a market of its own, maybe 4% of the total market and jewelry is a much bigger percentage, but like gold jewelry in the West, there’s huge markups on gold and silver jewelry. In Asia, that’s not so true. It’s usually pretty close to melt in most of the Asian countries, not all. India is that way. And of course, there’s places where there are huge markups, depending, but generally speaking, huge markups in jewelry.

Again, as I said, the complete report could be downloaded. They can do a hotlink here. And this reminds me of Silver Institute study that was commissioned by them years and years ago. I’m going to have to guess probably in the 90s. It was commissioned by two Charles Rivers Associates. And I bought it. I have it. I have it in my bookcase back here somewhere. And what they did was they looked at how much silver had been lost. And also the above ground stock pile said what price mechanism or what price levels would have to be achieved to start bringing out silver, especially silver that was in non-investment form like silverware or jewelry or whatever that could be smelted and rerefined into 99.5 commercial bars.

It was a very fascinating study. I don’t have the numbers in my head, so I won’t misstate it, but it was a higher price than I thought, according to them. And also the other part, and I’m going to shout out to James Anderson, and I forget who he’s interfacing with. He tagged me and said, David probably knows a thing or two about recycling of silver. And I do. And so this study of Charles Rivers Associates said how much silver had been lost. It’s a huge amount, huge. And it’s an estimate, an educated guess.

I’m not going to argue with them. It was a big number. Having said that, the late great Jim Dines who wrote the Dines letter and was instrumental really in getting me into this business because I just admired what it was, what he did in the group. I was certainly a hard money advocate before I even knew there was such a thing as a newsletter industry. But coming back on point, Jim Dines said years ago that silver and gold become so scarce and so difficult that the waste areas, the refuse dumps would be mined for their metals content.

And I remember reading that the first time years and years ago and kind of laughing a little bit. I took pretty much everything he wrote fairly seriously, but that’s the point. And this back and forth between James and someone or someone else’s, I’ll give you credit. I can’t remember. Is that possible? You bet it is. There’s a lot in the e-waste field. That was the number one question I got when I went to China and met with the mining bureau and some of the investment banks in China that were silver savvy. They were really pinning me down on how do you recycle everything in the silver world? And of course, we don’t.

A lot of it ends up in landfills. So I think I’ll just make that comment. Thanks for the shout out. James, thanks for all the help. I was just thinking about it before I sat down for this and all the people that are now involved in the silver world and precious metals and finance and truth and all of it. But going down to the subset of silver only, I mean, basically way back in the early 2000 or 1999, it was Ted Butler and me. As far as I could tell, and I reached out to Ted and then I met Ed Steer.

Ed’s been at this probably as long as me, maybe not publicly, but privately. And so many out there that have contributed and helped me, found stuff for me. I mean, Mike Maloney, I can name them all. You don’t want to leave anybody out. But I want to thank you all. And I think the community is very cooperative most of the time. We just don’t agree on everything. I don’t think I agree with everybody out or anybody out there 100% of the time. But that’s okay. So steel sharpens steel. It’s good to be challenged or you know, where’d you get that data or can you verify it or is it hearsay or whatever.

Hopefully, it sharpens us all and makes us better. So enough, I just wanted to show a little level of gratitude. Certainly, my work has gotten better because I’ve gotten some great help. And people that have helped me when I’ve asked for stuff I couldn’t find easily or whatever. So I’m yakking on. I’ll leave it there. Take a look at this study. If you are a silver bug, I think it’ll be a bit of an eye opener, especially those bullet points. Some of them that I read that just really don’t seem to make common sense.

But again, it’s the world of silver. I’ll be back with you next week with another weekly perspective. This is David Morgan of themotorreport.com
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