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It has been four months since the #SilverSqueeze movement began on Reddit and Twitter. While it's difficult to quantify the impact this is having on the digital derivative price, there's no doubt that there have been major implications for the physical market.
Before we begin, it's important to understand that the #SilverSqueeze effort is unrelenting. There are now over 82,000 Reddit users subscribed to the Wall Street Silver page, and another physical buying spree is planned for Wednesday and Thursday of this week. There are some who state that the price impact has been minimal, and I suppose they're correct when they only use the COMEX price as a reference. But, for today, let's ignore the digital derivative price. What about the physical market? What impact are the "silverback apes" having there?
Let's start with the basics. Over the past five years, the average annual global mine supply of silver is about 850,000,000 ounces. Of this supply, about 600,000,000 ounces get devoured each year by industrial demand. Think solar panels, cell phones, batteries, wiring, etc. If you add back in the recycling that comes in each year, you get about 300,000,000 ounces left over for investment demand. Any demand above that level leads to a supply deficit, and for The Bullion Banks, which manage the flow of metal around the planet, a supply deficit creates a bit of a problem.
Though it's impossible to know for certain how many ounces have been purchased by retail investors since late January, the continuing premiums for physical silver demonstrate that supply remains very tight. Here are just a few examples:
And you can forget about getting any American Silver Eagles. Supply has disappeared as the U.S. Mint prepares to roll out a new design in July. But even once the new coins are available, collector demand and wholesale resupply will make ASEs very expensive into at least early 2022. Thus the price you see below is unlikely to fall any time soon.
As the #SilverSqueezers keep buying up physical silver, you should expect rising premia across all products in the months to come. Consider yourself warned.
So perhaps a way to make a continued impact on physical supply is through the acquisition of shares of the PSLV? (Note: Sprott Money is not affiliated with Sprott Inc, the manager of the PSLV.) Does buying a physical ETF have an impact? Yes it does! How do we know? Please be sure to see this excellent summary from Reddit user "Ditch_the_DeepState":
Within that post, you'll find the chart below:
What you can clearly see is the impact that #SilverSqueeze has had upon physical demand. Beginning around February 1, the COMEX has seen withdrawals of over 45,000,000 ounces from its registered inventory. And this is not just a paper shuffle. Instead, these are ounces that have left the vaults.
ANOTHER MASSIVE COMEX SILVER DEPOSITORY WAREHOUSE REPORT RELEASED TODAY! FROM 2 FEB 2021 PEAK OF 399.7 MILLION TROY OUNCES, 46.2 MILLION TROY OUNCES HAVE LEFT THE COMEX!
COMEX CONTINUES TO BLEED SILVER!
WE ARE WINNING THE GREATEST SILVER WAR IN MODERN HISTORY!
— John Adams (@adamseconomics) May 21, 2021
But let's replot that chart above. Let's invert the COMEX withdrawals and plot it with the PSLV additions. What do we find?
Well, now, that's interesting! While you should not assume that the additions to PSLV are coming straight out of the COMEX, you should definitely assume that all of this retail physical demand AND physical ETF demand is making an impact. Therefore, if we want to drive change in the fractional reserve and digital derivative pricing scheme, WE HAVE TO KEEP GOING.
To that point, you might want to watch this video I recorded on Monday with Andy Schectman and Jim from Wall Street Silver. We explain the current physical demand situation in greater detail and explore ways to get more physical metal investors involved in the movement.
In the end, what do you have to lose by diversifying out of some of your dollar reserves and into physical metal? This is precisely what many central banks around the globe have been doing at a record pace over the last 24 months, and if it's a good idea for them, why isn't it a good idea for you?
In doing so, it's possible you'll help drive a monumental change in how price is derived. This is something we've been advocating for over a decade now, and with the persistence of the #SilverSqueeze movement, we might just get there sooner rather than later.