The Silver Institute’s 2024 World Silver Survey paints a concerning picture of the silver market. For the fifth consecutive year, global demand for silver outstripped supply in 2023, resulting in a deficit of 142 million ounces. The outlook for 2024 is even more alarming, with the annual production shortfall projected to nearly double to 265 million ounces.
The widening supply-demand gap is reflected in falling COMEX vault inventories. These vaults hold a significant portion of the world’s above-ground silver stocks, and their inventory has dwindled from a peak of 400 million ounces in early 2021 to just over 291 million ounces today. A similar decline has been observed in the London Bullion Market Association (LBMA) vaults, where stocks have plummeted by more than 300 million ounces since 2021.
The declining inventories indicate that the silver market is facing a physical shortage. While some above-ground stocks exist outside of publicly reported stockpiles, these are likely to be drawn into the market as prices rise. The sheer magnitude of the projected deficit suggests that significant price increases are necessary to incentivize new mine production and draw silver out of private hoards.
In addition to the supply deficit, concerns have been raised about potential double counting of inventory in the iShares Silver Trust ETF (SLV). Ted Butler of Butler Research has questioned whether the 100 million ounces of silver reported by SLV are also being included in COMEX inventory by JP Morgan Chase, which acts as custodian for the ETF. This could artificially inflate the perceived availability of silver.
Adding to the uncertainty, the number of outstanding SLV shares has recently declined, indicating that investors are withdrawing their silver from the ETF. This is counterintuitive in light of rising silver prices, raising further questions about the accuracy of reported inventory levels.
The combination of the silver deficit and potential inventory issues has created a bullish market outlook for silver. As the physical shortage persists and investors seek to protect their wealth, silver prices are poised to surge, providing a compelling opportunity for those seeking to capitalize on this precious metal’s future potential.
