Are You Ready for "Peak Silver"?

-- Tim Begany

We've all heard of peak oil -- the notion that, because there's a finite oil supply, production will one day begin to progressively diminish until there's no oil left. Well, a similar thing may be happening with silver, one of the world's most desired precious metals. That's why we at StreetAuthority think silver may be one of world's most coveted investments in the coming months and years.

Investors have been flocking to this metal for safety, just like gold. But that's not the only thing behind the high demand, which has been so great some experts say supplies could actually run out completely in only nine years. Industry has been gobbling silver up, too. Think about it. Silver is a crucial component in so many items considered essential to modern life. It's in our flat panel TVs. It's in our iPhones. It's also in solar panels, the use of which has climbed by more than seven-fold in the past decade. All told, demand for silver in consumer electronics has more than doubled in the past 12 years. Total industrial demand is forecasted to rise to 666 million troy ounces per year by 2015, nearly a 40% jump from today's level of industrial use.
Whether peak silver will actually come to pass is anyone's guess. It's just too difficult to predict these sorts of events with any kind of accuracy. But one thing seems certain: at this point, there isn't enough silver to go around, and it doesn't look like there's going to be any time soon. The chart below provides an excellent illustration of this.

As the chart shows, total demand for silver -- the amount demanded by investors and industry -- has long outstripped what mining companies have been able to produce. This year, the estimated shortfall is about 120 million ounces, the difference between the 900 million ounces demanded and the 780 million ounces the mining industry will be able to supply. In other words, according to the chart, silver has been scarce for more than a decade, even though miners ramped up production 30% during that time.
Sounds pretty dire, doesn't it? We could be facing an ongoing silver shortage or maybe even a peak-silver situation that plays out within a decade. It all depends on how you look at it. For investors, it could mean a long and profitable bull market in silver, since shortages typically mean higher prices in the long-term.

Simple Math and $100,000 Gold

If I need to SHOCK you into attention, I will.
Given that I know gold is going, MUCH, MUCH higher, it doesn’t matter what number I put in the title.  At current prices, PHYSICAL precious metals are the bargain of a lifetime, far more so than when gold was $250/ounce a decade ago, and silver just $4/ounce.  The explosion of global MONEY PRINTING since 2000 will be remembered as the most insane financial experiment of all time, which unfortunately is just getting started.  That $100,000/ounce gold projection is NOT a joke, as you will see at the end of this RANT.
Before I get started, I want to darken the mood a bit, as the world is a bit too giddy about the hype of the abbreviation du jour, the LTRO funding facility that emerged out of Central Bank ether to yet again enslave – er, save Europe with another massive dose of crack – er, free bank loans.
Beware the Coming Bailouts of Europe
I see no difference between the LTRO bailout and the November 30^th Fed “swap facility,” only this time the ECB, which just two weeks ago said it wouldn’t print money, is the bank showering the world with paper.  THAT’S how bad things are, and wouldn’t you know it, the LTRO emerged, yet again, just as Bank of America was about to break down through $5.00/share, creating a landslide of margin-based selling that could have kick-started the END GAME.  Not to mention, right before the New Year, to ensure TBTF firms aren’t scrutinized for awarding gargantuan, taxpayer-funded bonuses to executives before the system collapses in the first half of 2012.
In my view, this ominous, apocalyptic cloud formation is more appropriate to the current financial situation than the horns and whistles of this morning’s BLATANT bank bailout, and accompanying stock market orgy, which will likely have the same decreasing HALF-LIFE of all previous salvation attempts.

Gold the protector as democracies move towards totalitarianism Gold, and perhaps silver, are still in a bull market phase which is likely to continue as governments print money, spin figures, manipulate markets and erode basic liberties.

Author: Lawrence Williams

Let's look at the realities. Governments can release trillions of dollars into the markets to try, mostly unsuccessfully so far, to stimulate growth, mitigate unemployment and keep the general population's ‘feel-good' factor short of being suicidal. In this context it is hardly beyond likelihood that the relatively tiny sums (in comparison with all the money being printed under quantitative easing programmes) needed to keep stock markets appearing at least reasonably healthy - on the grounds that a healthy stock market gives the impression that the economy in general remains sound - may be being deployed. Likewise dollar, or other currency, strength - or weakness - is indeed often manipulated by governments as perhaps can be the price of gold (effectively a currency in its own right) where a rising gold price is a flag that all is not well with the mighty dollar or, indeed, with the global economy in general.

Overall, the writer views gold at the moment in a positive light and as remaining in a bull market phase as the global economy continues to collapse around us. The Eurozone crisis is not played out yet and debt levels within and outside the common currency area, and in the USA, continue to cause major concerns and it is difficult to see any certain way out of the current crisis. Maybe we will muddle through, but living standards are set to fall - drastically in some areas. Gold, and by association silver, have tended to stand the test of time as offering at least some wealth protection. History, which does tend to repeat itself over and over, is on their side.

Organisations such as GATA have been suggesting that gold and silver prices are manipulated by governments and banks - and the way the silver price was hit back in May does certainly suggest that the huge fall in a matter of minutes at a time virtually no-one would have been at work has to be suspicious to say the least. If gold and silver might be subject to external manipulation then it is not beyond the bounds of possibility that stock markets can be too with concerted buying or selling at key moments. Certainly inflation figures are massaged to protect confidence and the suspicion is that many other government statistics are too.

This is, of course, pure conjecture, but with so-called democracies seemingly moving ever further into totalitarian territory as basic liberties are taken away from us, in the name of counter-terrorism or economic necessity, it is difficult to judge to what purpose some of the huge, and ever-growing, debt may be being applied.

Likewise, the long-held GATA view that the gold price has been suppressed, if that has been happening, is also clearly unable to keep the price down, although GATA would argue that without suppression the price would be far higher.

The writer reiterates his view that all the drivers which have been responsible for gold hitting its highs are still intact and there is likely further upside ahead.

Silver is still suffering even more than gold from the even bigger fallout (in percentage terms) in May, and then again in September, which dented investor confidence - and with signs that the global economy is not pulling out of recession, and that any future growth will be strictly limited for years to come as austerity programmes make their impact, silver's industrial demand element may hold back rises. However, overall, we would still expect it to track gold and the thinness of the market could lead to some considerable volatility.

But bear in mind also that dollar strength is relative - and illusory. It is just doing better on the way down than many other recession hit currencies - notably the Euro. It will inevitably be hit by rising inflation from the printing of all that additional money from QE and other stimulus programmes.

Silver Update 12/20/11 Pension Bomb