Silver’s Shining Moment: Why Silver is Set for a Breakout
Here’s why silver is ready for real bullish momentum in the months and years ahead...
"Every cloud has its silver lining, but it is sometimes a little difficult to get it to the mint.” –Don Marquis
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It’s Silver’s Time to Shine
Silver is gearing up for massive gains. That might be a bold statement after we focused on gold, silver’s richer cousin, in our recent weekly Prinsights Pulse.
But silver has the dual benefit of being both wealth preserving as well as an industrial-use value asset. While silver has served as a historical currency its superior conductive properties are needed in the global energy transformation to create more efficient power.
Ounce per ounce, silver is also about 88% cheaper than gold.
There are multiple factors driving silver prices today. Those include market expectations of Fed rate cuts later this quarter, persistent inflation, rising geo-political tensions and any pending chaos that lingers on the back of critical elections, both in the U.S. and abroad.
Against this backdrop, silver has been one of the best-performing major commodities this year. It is up about 23% since the start of this year and up about 19% since this time last year. In contrast, gold has increased by around 17% since the start of the year and 23% over the past year.
And as I'll show you today, silver still has room left to run. In fact, I believe these recent gains are just the beginning of a major bull market. Below, we’ll cover the major reasons why.
The World is Running Out of Silver
We’re seeing a significant drop in silver inventories across major exchanges worldwide.
By the end of 2023, New York’s primary precious metals trading exchange, COMEX, saw its silver stacks drop by about 46% to 60 million ounces from 110 million ounces. Even with a mild bounce back this year, the precious metal remains in high demand.
Globally, the silver market is in its fourth straight year of supply shortage. This year’s shortage is forecast to be the second largest in recent years.
One major reason is that silver is only mined in a handful of countries including Mexico, Peru, Argentina, and Chile – which are periodically at risk of economic and political instability.
The COVID pandemic also took a swipe at silver mining and impacted Mexico, the world's largest silver producer, in particular. In the spring of 2020, most mines there were shut leading to significant production losses and backlogs. A similar story unfolded in Peru and China, some of the other top silver-producing countries.
Globally, more than 100 silver projects were shut down at some point that year, causing more than a 6% drop in the world's silver mine production.
As we fast forward to 2024, the global silver mining industry is still reeling from the pandemic. While production levels have improved, they haven't returned to pre-pandemic levels.
The problem is that the silver supply market can't bounce back from mining disruptions overnight. Overcoming such issues takes money and time.
Plus, these supply constraints are happening alongside historically high demands.
The Silver Institute forecasts that the annual silver production shortfall will almost double to 265 million ounces this year. That’s after a cumulative deficit of 440 million ounces between 2021 and 2023.
The Current Wind Beneath Silver’s Wings
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