Ed Zimmer's  Instablog

 As of June 18, 2009, COMEX reported deposits of 119,313,877 Toz of silver, IShares SLV reported 280,510,676 Toz.   Various Published reports indicate that IShares holds about 2/3 of the entire world stock of silver, which would place world silver reserves around 420 Moz.    By that reckoning, COMEX holds all but 20 Moz of the remaining silver inventories in the world.

 This does not take into account the private silver holdings (coin and medals) which accounted for 65 Moz of production in 2008.   COMEX holdings are supposed to be in Good Delivery Bars of 1,000 ounces (more or less) and much of the IShares is probably as well.

  If most of the coin and medal production of the past ten years has gone into private hands, then almost 386 Moz of silver is currently in private hands.   That would put total world known reserves around 800 Moz.

http://www.cmegroup.com/trading/energy-metals/nymex-daily-reports.html

http://us.ishares.com/product-info/fund/overview/SLV.htm

Silver Institute supply and demand figures 2008

Does the 20Moz, not accounted for, cover the rest of the silver stockpiles in the world?    Or are there additional stockpiles that we are unaware of?   I do not yet have answers for that.

Expectations are that the amount of silver mined in 2009 willl fall below levels of 2008, but so will demand.   The question is how much.   The Silver Institute balances out Supply and Demand by adding figures for old silver scrap and Net Government Sales to their Supply side and producer De-hedging and Net Investment to the demand side.    It is interesting that Total Fabrication, minus de-hedging and Net INvestment has been running significantly higher than Mine Production since at least 1999.   The US Government transferred all of it's Government Supply to the mint by calendar year 2004 and currently retains no silver stocks outside of what the US Mint purchases to produce American Eagles.

At the current deficit ratio, it would take about four years to consume not only the silver in deposits, but also in private hands.   That would leave us trying to prioritize slightly less than 700 Moz of silver production a year with a demand of 825-850 Moz per year.   It could be done by restricting silver to industrial applications and eliminating photography use altogether which might allow for the continued use in jewelery, silverware and coins.

Government Sales have been steadily dropping since 2006 according to the Silver Institute, from 78.2 Moz to just 30.9 Moz in 2008.   Even scrap sales were down from 188 Moz to 176.6 Moz.

Meanwhile IShares SLV has added 3500 Tons of silver to their holdings from levels reported by the USGS in 2008.   That's 112 Moz diverted to investments.   I say diverted because the silver going into IShares is not coming from industrial applications and has to be coming from existing silver stockpiles.

This brings up some interesting points.   If IShares is adding silver at such a rapid pace, where is the additional silver going to come from when there is a yearly deficit?   19.5 million of the 64.9 million ounces of silver for coins and medals was accounted for by the US Mint.   So far through mid-June, the number is 13 million which would put the total production from the Mint at potentially 25 Moz or more.   Using the same ratio as last year, that would translate into a coin & medal demand of  83 Moz for 2009 or 20 Moz more than last year which would offset the photography application decline.    If IShares goes over 10,000 tons of silver (they are reporting 8700 right now) that would have to come from current mine production.

I'm not sure the Silver Institute is taking into account the IShares silver demand.  Perhaps they are but it does not appear to be the case.

Another point is the USGS records the Treasury as having 220 tons of silver on deposit with the USMint as of 2008.   This is 11 times the amount of silver that should still be available for counting as "world reserves" and that figure has remainded unchanged since 2000.  (In 1999, the Treasury reported 618 tons of silver, it fell to 220 in 2000 and has remainded unchanged since.)  

USGS Mineral Commodities Survey, PG 148.

Disclosure: Long GLD,SLV, physical holdings, stock in retirement accounts