Supply and Demand in the Silver Market


Silver market have been doing well, its supply has primarily increased, seeing as 200 million ounces of silver, which used to return into the market as photo recycling might be as low as 185 ounce because of digital photography (Jeffrey, W. 1995). Also, the base metals mining is increasing significantly and for that reason, the byproduct silver is increasing as well. From the research conducted in 2004, it shows an estimation increase of silver product to be 23 million ounces better then 2003. (Paul Mladjenovic, 2005)

Moreover, according to the statics of July 1, 2003 and November 30, 2006 betwixt gold and silver: the demand of gold increased almost 84% whereas silver increased more than 200%, this shows that silver market demand is growing around the global, while supplies are quickly disappearing. From 1990, silver demand has been exceeding annual production depleting above-ground accumulations of silver. The United State government is one of the largest stockpiles of silver around the world; it normally dumped billions of ounces of silver onto the world market each an every year, which result in depressed silver prices. Currently, that government silver hoard has disappeared, and at the moment, the U.S. government is buying silver from prevailing world silver prices. Due to this, the silver market appears to symbolize an outstanding investing opportunity. As noted from the CPM Group’s Survey 2003, there are about 2 billion ounces of gold bullion and 400 million ounce of silver bullion: The below graph shows the demand of silver and gold from 1990 to 2001. Morris, S. 2001)

It’s also noted from Resource investor article that silver has continuous primary deficit from 1996. Most of these are mostly caused by net government sales, thereafter it goes to sale. The Canadian brokerage estimates that if this new application for silver turned out to be popular, the annual deficit might spread as much 250 million ounce. Yet again, there’s overhang of 600 million ounce of silver bullion that is basically a number produced by GFMS exclusive of more detail at all. Conversely, the demand is much vital than supply, it’s a fact that just about 1.5 billion ounce of silver bullion kept it head above water in 1980 when the price provisionally went to 50 dollars per ounce (Fernand, B. 1993): The reason why I consider demand as more important than supply is because demand is the one that took the price higher. The below graph shows, surpluses symbolize investors who buys more silver, whereas deficits symbolize investors who sell silver into the bazaar on a net basis.

            Moreover, as noted from Morgan, J (2004) it’s not inflationary problems which have created the Bull Run in metals. The demand and supply is much stronger than ever. As noted to the GFMS, a valuable metals research and consulting firm, the demand for silver has outpaced supply for more than 15 years. Whereas the supply deficits of silver have ran, on average, more than eighty seven million ounces annually over this episode (Gold Eagle, 2009). This is well demonstrated by below graph.      

However, there’re other factors such as financial and security. Currently, the financial system isn’t doing well as well as social security system. This has resulted to pension plans to be in dire straights. Most of the countries around the global are grappling with the long-term affordability of their annuity systems. This is noted from the World Bank report, it even state that China is facing a demographic crunch: after mid century, its populace will be older, typically, than Americans, express gratitude’s to its one-child policy (Jeffrey, C 2006). China has broadened its social security system by expanding private pension scheme of “enterprise annuities”, said Richard Hinz, coauthor of the World Bank statement. (David M. 2006)

On other hand, from Florian, K. & Cornelius (2008) silver price has unquestionably remained outside of its acquisition power range for a long duration, that’s twenty five years until now. Although, things are extremely changing in the world’s financial landscape, and the fresh silver age is hurriedly approaching, foremost from a technological standpoint, and from a monetary and wealth building/safeguarding perspective. (Burton, G. 2003)


From Steven McIntyre and Todd Stein, CFA, (February 2004), for many years, silver market has been performing well, however, there various factors which have caused the shift in demand and supply curve. Some of the factors are security, finance, government policy, and technology. Nonetheless, silver business has remained unyielding, and it will continue prolonging despite all the obstacles that are there in the market since it’s one of the most precious metals.      

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