The London Bullion Market Association (LBMA) is the world’s largest silver exchange. For the last nine consecutive months, the quantity of silver held in LBMA vaults have declined. The August 2022 report states that the vaults now hold only 916.5 million ounces of silver, the lowest total since July 2016.
In November 2021, the LBMA vaults held 1.170.6 billion ounces of silver. Since then, inventories have fallen 21.7 percent. As dramatic a drop as that is, it becomes even more extreme when you consider only the LBMA inventories not owned by 13 silver exchange traded funds (ETFs) and the private client investors who are customers of Bullion Vault and GoldMoney.
As of Sept. 8, a total of 592.8 million ounces of silver in LBMA vaults were owned by these 15 entities. That means that around 320-325 million ounces of LBMA silver were available to other parties. That is an even larger percentage drop from the approximate 470 million ounces that were available to other parties in November 2021.
This silver is not showing up in the vaults of the New York COMEX. Silver in COMEX vaults is held in two different categories. Registered inventories are available to deliver in fulfillment of maturing commodity and options contracts called for delivery of the physical metal. Eligible inventories are NOT available to deliver against maturing COMEX contracts unless the owners specifically elect to reclassify such holdings to registered status.
Over the past nine months, eligible inventories at the COMEX have mostly ranged from 250-280 million ounces. On Sept. 8, there were only 45.99 million ounces of registered silver in the COMEX vaults, down from about 80 million ounces at the end of 2021 and from about 150 million ounces at the end of 2020. Current COMEX registered silver inventories are at their lowest level since July 2020.
Where is the physical silver going that is leaving the LBMA and COMEX? Metals Focus India reports that silver demand in that country, perhaps the world’s top silver consuming nation, is now so strong that the silver price in India is trading at a premium to the world silver spot price. In July 2022, almost 58 million ounces of physical silver was imported into India. This was at least 50 percent higher than in any month in the previous four years and may be an all-time high record amount of imports into India in any month.
Over the past year, the bullion banks that facilitate trades in the silver market have reversed their previous net short positions to now be in a net long position. Obviously, their shift from an overall short position to long position has also absorbed tens of millions of ounces of silver.
Worldwide silver mining output now averages about 70 million ounces a month. Silver recycling operations produce about 15 million ounces monthly. With industrial and investment monthly demand for physical silver now about 95 million ounces, demand is again outstripping supply. Now that information on how much the silver inventories at the LBMA and COMEX are declining is becoming more widespread, the prospects for higher prices over the next year are looking more attractive.
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award, 2012 Harry Forman National Dealer of the Year Award and 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2020), Professional Numismatists Guild, Industry Council for Tangible Assets and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).