2015 Record Silver Investment Ratio: 1% = 30%

October 22, 2015

silverIt looks as if 2015 will turn out to be a record year for silver investment demand.  Not only will total silver bullion demand be the highest in many decades, it will account for nearly one-third of total fabrication demand.  This is a huge increase when we consider less than 1% of investors are buying silver.

We can thank the huge surge of physical silver investment in 2015 from record Indian (Silver Bar) and North American (Official Silver Coin) purchases.  According to ETF Securities Q3 2015 Precious Metal Report, India is now on track to import a stunning 350 million oz (Moz) of silver in 2015:

In addition, India accounted for 71% of total silver bar demand in 2014 (2015 World Silver Survey).  Compare that to the total U.S. and Royal Canadian Mint’s Silver Eagle & Maple Leaf sales of 73.2 Moz in 2014.  These two Official silver coin sales accounted for 68% of total Official Silver Coin sales in last year.

While it’s true that Silver Eagles and Maples are sold to other foreign countries, the majority of Official Silver Coins are purchased in North America.

Physical Silver Investment Estimated To Hit Record In 2015

Not only will physical silver investment demand hit a record in 2015, it will account for nearly one-third of total fabrication.  This includes industrial, jewelry and silverware demand.  If we look at the chart below, we can see the huge increase in physical silver investment demand since 2006:

In 2006, investors purchased 49 Moz worth of physical silver bar & coin compared to 884 Moz of industrial, jewelry and silverware demand.  Thus, silver bar & coin demand was only 6% of total fabrication demand (including bar & coin) in 2006.  However, this physical silver investment ratio surged to 24% in 2008 as investors purchased record silver bullion during the collapse of the U.S. Investment Banking & Housing Markets.

Even though the amount and percentage of physical silver investment fluctuated over the next several years, it is estimated to reach a record 260 Moz in 2015, accounting for 30% of total fabrication.  The figures from 2006 to 2014 are based on data from the Silver Institute.  The Silver Institute publishes figures obtained from Thomson Reuters GFMS who produce the World Silver Surveys.

I estimate total silver bar & coin demand to reach 260 Moz in 2015 based on record Official Silver Coin demand as well record India silver imports.   My 260 Moz figure is only 16 Moz higher than the previous record set in 2013 at 244 Moz.

Regardless, only 1% (actually less than 1%) of investors in the world are buying physical silver.  Which means, 1% of investors are controlling 30% of total silver market demand.  While the rest of the world is consuming silver in the form of industrial applications, jewelry or silver ware, just a fraction dominate all physical silver investment on the planet.

This is a stunning statistic.  Eventually, we are going to see 1-2% more investors wake up to the fact that silver is one of the most undervalued assets in the world.  When this occurs, annual physical silver investment demand will surpass 500 Moz, thus totally overwhelming the market… and price.

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Peru became the world’s largest producer of silver in 2012.