In recent weeks, three significant tailwinds for silver appear to have gone under the radar. They have come in the form of India’s bulk buying, gold leaving the Comex and some telling changes in the BRICS Nations.
According to Reuters, India's silver imports are set to triple in 2022 from the previous year as the nation sees silver as undervalued. Since silver has dipped under the structurally important level of $20/oz, it has caught the eye of many on how low it can go, with many believing it has now bottomed or is very close to it.
India is the world’s largest consumer of silver. Imports of the white metal in 2022 are projected to hit a record 8,200 tonnes. This is a third of the yearly total world mining supply. From January to July 2022, silver imports surged to 5,100 tonnes from just 110 tonnes during the same period a year ago, according to provisional data from the Ministry of Commerce and Industry. Low prices are indeed the cure for low prices, as the old adage goes.
The thinking behind this is simple – Silver won’t stay at these price levels for long, and a rebound in prices is long overdue. Many in India see the potential for silver to outperform gold, and why wouldn’t they? After all, in every bull run experienced to date, on a percentage basis, it has.
In the US, specifically the Comex, Silver is also seeing a major change in inventory. Unlike gold, the metal has not yet started leaving the exchange, but the amount available for delivery (Registered category) has plummeted in recent months.
Silver registered is down 41% since Mar. 15, 2022, and down 65.7% since February 2021, when social media and WallStreetSilver brought attention to the white metal and how undervalued it is. Gold tends to be a leading indicator, always moving first and leading the commodity sector. The fact it is leaving the Comex now could be a clue to where silver is heading next.
In June, Vladimir Putin said that the BRICS nations (Brazil, Russia, India, China, and South Africa) are developing a new basket-based reserve currency. This is an attack on the US, who weaponized the US dollar, and the guess is that it will consist of all the nations’ currencies as an alternative to the IMF’s Special Drawing Right.
Essentially this is kick-starting a turning point in the dependency on the US dollar and, in turn, firing back at their dominance. Should these countries wish to return to a Gold standard – which isn’t too far-fetched given the stockpiles of the yellow metal that China and Russia have – then, it will be the straw that breaks the US dollar Camel’s back.
The dash for hard assets will be fast when the world wakes up to the failing US dollar and fiat currencies. Supply and demand fundamentals have to come into play at some point. When inventory levels (specifically the Eligible category) drop further, panic will hit the Comex, and physical demand will break the paper game. This will lead to price discovery in the metals and crush the paper manipulation for good. Patience will be rewarded.