{"id":82810,"date":"2015-12-21T10:33:23","date_gmt":"2015-12-21T15:33:23","guid":{"rendered":"http:\/\/countingpips.com\/?p=82810"},"modified":"2015-12-21T10:33:23","modified_gmt":"2015-12-21T15:33:23","slug":"u-s-silver-production-plunges-by-20","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/12\/u-s-silver-production-plunges-by-20\/","title":{"rendered":"U.S. Silver Production Plunges by 20%"},"content":{"rendered":"
December 21, 2015<\/div>
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By Jason Hamlin, GoldStockBull.com<\/a><\/strong><\/p>\n

The U.S. Geological Survey (USGS) released their September silver production numbers this week and the results were incredible. Only 82.6 metric tons (mt)\u00a0of silver were produced domestically in September versus 103 tons during\u00a0September of last year. This represents amassive decline of 20%<\/strong> and is part of a greater trend of declining silver supply.<\/p>\n

As you can see from the chart below, 2015 silver production started the year higher than 2014. But in the spring, things started to shift. Production dropped 4% in March and has been declining ever since for six straight months. This trend of falling silver\u00a0production culminated with the sharpest decline on record during the latest period, down 20%! Indeed, many analysts believe that we may have already seen PEAK\u00a0SILVER production.<\/p>\n

\"Silver<\/a><\/p>\n

During 2014, production ramped up significantly in the winter months, but this year is shaping up to be quite different. Even if production were to rebound a bit in the coming months, we are still likely to see the gap versus widen comparing this year vs. last year. And if production does not rebound sharply, we are going to see declines of 30% or more in the coming months.<\/p>\n

This is a significant development for silver investors, as sharply dropping supply and steady demand is a clear recipe for higher prices. Remember, sales of American Silver Eagles are on pace to set a\u00a0new record<\/strong>\u00a0for the third year in a row. Total sales through the end of November stand at 44.7 million ounces passing last year\u2019s record of 44.0 million ounces.<\/p>\n

Silver demand has also been hot in Canada, with the most recent\u00a0quarterly silver sales\u00a0on pace to\u00a0break\u00a02014\u2019s record<\/strong>.\u00a0Silver sales increased\u00a076%<\/strong>\u00a0year over year from 5.4 million to 9.5 million ounces. Year to date through the third quarter of 2015, the Royal Canadian Mint has sold 25.2 million ounces of silver, on pace to surpass 2014\u2019s record silver sales.<\/p>

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If we haven\u2019t see the bottom in silver yet, these fundamentals factors suggest that we are close.<\/p>\n

While silver miners have reduced their costs in recent years, many are still unprofitable at current silver prices. There aren\u2019t many things that you can buy for less than the cost to produce it. There simply wouldn\u2019t be anyone making the product anymore and silver is no different. These conditions can persist in the short-term, particularly with the leverage paper markets having such a large impact on pricing. However,\u00a0I don\u2019t believe that the silver price can remain below the average cost of production for long. Eventually the fundamentals force prices back to correct equilibrium given the supply and demand in the marketplace.<\/p>\n

I have long anticipated that as\u00a0a growing number of\u00a0miners would suspend operations, pushing silver supplies down\u00a0sharply. We are finally seeing this manifest with the latest monthly production data. It holds true for primary silver miners, but also for base metals producers where silver is a by-product. They are also facing plunging prices in industrial metals and are having a hard time remaining profitable. As they are forced to suspend or shutter operations, silver production is going to fall even lower.<\/p>\n

The decline in\u00a0silver supply is not going to be a short-term phenomenon. Not only is current production impacted as miners shut down operations, but future production is also impacted as exploration budgets are slashed. Even if the silver price were to double in 2016 and miners increased cash flows,\u00a0it would still take a few years to increase exploration back to previous levels and have the type of production pipeline needed to sustain production levels. Anyway that you slice it, the industry is likely to face declining silver production for years to come.<\/p>\n

I am not convinced that we have seen the absolute low in silver prices quite yet. But this type of data is encouraging for silver investors and suggests that the bottom may be near. Rather than attempting to time the exact bottom, I think it makes sense to begin purchasing in tranches around current levels. This is true of physical silver, but also the severely undervalued silver mining stocks that could offer leverage of 3X to 5X during the next upleg.<\/p>\n

And although the FED finally pulled the trigger and raised rates by 25 basis points this week, there is plenty of evidence to suggest that silver (and gold) prices can climb higher along with interest rates. There is also the distinct possibility that the FED will not be able to continue raising rates beyond a token amount and will need to reverse course at some point in 2016. So, I do not believe that precious metals investors should fear increases rates.<\/p>\n

If you would like to get an insider perspective on our thinking about the markets, view our model portfolio, receive trade alerts and get the monthly newsletter, you can get sign up by clicking here<\/a>. The price is less than $1 per day and you can try it out for 30-day risk free! In addition to gold and silver stocks, we also cover energy, agriculture, and methods to short the market and hedge your portfolio.<\/p>\n

Article\u00a0by Jason Hamlin, GoldStockBull.com<\/a><\/strong><\/p>\n

About the Author:<\/p>\n

Jason Hamlin is the founder of Gold Stock Bull and has been investing in precious metals for over 20 years. Jason spent nearly a decade in analytics for the world\u2019s largest market research firm, before finding success investing full time. He launched Gold Stock Bull in 2005 and turned his focus from helping fortune 500 companies to helping individual investors that were struggling to achieve strong gains in the stock market.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Jason Hamlin, GoldStockBull.com The U.S. Geological Survey (USGS) released their September silver production numbers this week and the results were incredible. Only 82.6 metric tons (mt)\u00a0of silver were produced domestically in September versus 103 tons during\u00a0September of last year. This represents amassive decline of 20% and is part of a greater trend of declining […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-82810","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/82810","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=82810"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/82810\/revisions"}],"predecessor-version":[{"id":82811,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/82810\/revisions\/82811"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=82810"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=82810"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=82810"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}