Physical Shortage Could Send Silver Prices Skyrocketing

Silver PriceHere’s Why I’m Ramping Up My Silver Price Forecast

It would be hard to deny that silver prices have experienced a profound downturn in the last four years. After having peaked at more than $50.00 an ounce in early 2011, silver prices took a nosedive, plunging by more than two-thirds in value and sitting uncomfortably at $16.50 per ounce now.

All smart investors recognize the intrinsic value of precious metals, but before diving into that, we should establish some basic facts about the matter.

To begin with, what we really need to do is answer a very fundamental question: what exactly are we discussing when we talk about the “silver price?”

It may surprise some people to realize that silver trades in several different forms and in different venues. So-called paper silver is bought and sold on futures markets, such as the COMEX. Alternatively, you can simply opt to buy physical silver at your nearest bullion vendor. And there is also the option of buying exchange-traded funds (ETFs) on an electronic stock exchange.

If you ask me, however, the only real silver price is the one you’re paying when you choose to purchase physical silver.

Rush to Physical Silver Suggests System Is On the Verge of Collapse

On that note, I noticed a fairly peculiar trend when I compared the market trends of the various silver prices. Consider the following chart:

silver spot price chart

Chart courtesy of

Now, cross-reference the above chart with the price of American Silver Eagle coins, as seen in the chart below:

1 year historial daily closing prices

Notice something interesting?

The phenomenon that emerges is fairly clear: you can see that the silver coin premium over the silver spot price has been skyrocketing.

Now, it is worth mentioning that silver coins have almost always commanded more value than digital silver traded on stock exchanges. But that price gap difference has been steadily increasing since early summer and it has now more than doubled it!

How Much Is Silver Really Worth?

Now what does this surging premium tell us, you ask? It is a very little known fact these days that the physical silver supply is actually getting tight and that demand significantly outpaces available silver supply.

In fact, the U.S. Mint announced that its top-selling Silver Eagle coin has sold out, citing surging public demand. (Source: “U.S. Mint Sold Out Of Silver Coins Due To Strong Demand,” Reuters, July 7, 2015.) Silver coin sails soared, hitting more than 4.8 million ounces in June 2015, which is twice the figure sold in May 2015.

Something is obviously going on here and figuring out what is going on is the key to understanding today’s silver price forecast.

At this point, you might be protesting this argument with the notion that silver bullion is not the only indicator of silver demand. This is, of course, true, but as it turns out, public demand for silver jewelry has also soared this year. American silver-based jewelry imports surged by more than 11% at the end of May 2015, following broader global trends. (Source: “U.S. Silver Jewelry Imports Rise in First 5 Months of 2015,”, August 5, 2015.) Thomson Reuters forecasts the world’s demand for silver jewelry to jump by more than five percent this year alone. (Source: “Upticks in Silver Demand Seen in First Half of 2015,” The Silver Institute, July 28, 2015.)

Translation: people are trying to get their hands on as much physical silver as possible, even going so far as to buy old silverware and earrings in the process.

Investors are becoming increasingly more skittish about the current health of our global financial system and with good reason. In contrast to those who are putting their faith in the value of paper silver or digital footnotes in some stockbroker’s file, more and more buyers seem to prefer having the real deal in their hands.

This makes sense, given silver’s status as a currency throughout history until only very recently. But there is also its use as an insurance policy in case of economic collapse, which is becoming more and more likely with slumping commodity prices, slowing economic growth in emerging markets, and the continued threat of a Chinese stock market crash.

Where Are Silver Prices Going Next?

I will leave you with one thought to ponder before signing off and it is this: if substantial amounts of investors are so desperate to get their hands on physical silver that they are resorting to buying up old forks and grandma’s earrings, you know there must be a serious economic issue brewing.

And that’s really the main issue here, because the physical silver price reflects real economic supply and demand fundamentals without the artificial dynamics of electronic trading to obscure the realities of a financial system that might be teetering on the edge of collapse.

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