Perfect Storm for Silver Surge
Silver is facing a perfect storm of rising demand and shrinking supply. For three consecutive years, silver demand has outpaced supply. According to The Silver Institute, 2024 is expected to see a massive 215-million-ounce deficit. As silver becomes more essential in industries like green energy and electric vehicles, the supply shortfall could lead to higher prices, making physical silver a valuable asset for those looking to protect their retirement funds.1
Growing Demand
Demand for silver has skyrocketed and supply hasn’t been able to keep up. This is largely due to its dual role as a vital industrial metal and a precious metal investment. Silver is essential to the green energy sector. The global push for renewables and electric vehicles solidifies its position as a critical resource.
An example is Samsung’s new a silver-based high-speed charging EV car battery. If it were adopted by only 20% of the EV car market, almost an entire year’s worth of silver production would be consumed.
According to Charlie Morris, founder of ByteTree, this development sets the stage for silver to have a 2010-like rally. “This reminds me of the silver rally of 2010, which saw the price surge to $50 on the back of demand for solar panels,” he said.2
Limited Supply
The silver market had a deficit of 184 million ounces in 2023. This year, that deficit is expected to be around 215 million ounces. That is the second largest silver market deficit in history. 3
At the same time, mine output has dropped since peaking in 2016. Silver has increased from $20 an ounce in 2016 to over $31 an ounce today. But mine production has not yet responded to higher prices. And experts don’t see production catching up with demand. Metals Focus said, ” mine supply growth is likely to remain modest, with only minimal increases globally.”4
Silver production is slow to increase because more than half of silver is mined as a byproduct of other metals. Until metals like copper, lead, and zinc experience huge spikes in prices, silver mining is unlikely to increase. Now matter how high the price of silver goes. Even the few silver-only mines are struggling. Ore grades have fallen by about 22 percent. This means the price of silver must rise that much to maintain margins. Overall, operating costs to mine silver continually outstrip revenue. Miners have been left with negative cash flow for years.
Metals Focus concluded, “It is implausible that new production could balance the current deficits over the short to medium term. For those shortfalls to end, we are instead dependent on recycling and demand to react to the forecast price rally.”5
Monetary Policy Impact
As of the end of 2024, the Federal Reserve is expected to keep lowering interest rates because the economy is slowing down, and a recession is growing more likely. When the Federal Reserve lowers rates, it weakens the U.S. dollar. Even though the dollar might go up a little in the short term, experts believe it will continue to drop. When the dollar gets weaker, silver prices tend to go up because they tend to move in opposite directions.
Silver Price History
Over the past few decades, silver prices have followed strong upward trends. Major growth was driven by increased industrial and monetary demand. Especially after the Great Depression and World War II. The reduction of silver content in U.S. coins in the 1960s caused a speculative boom, with prices peaking in the late 1970s. A pattern known as a “cup-and-handle” has formed since that peak. The pattern often signals a potential price increase.
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Silver Forecast
Silver is predicted to reach new heights. This increase is fueled by growing industrial demand, central bank policies, and limited supply.
The gold-to-silver ratio, which shows how much silver you need to buy one ounce of gold, has dropped from a high point. When this ratio is high, it means silver is cheaper compared to gold. When the ratio is low, silver is getting more expensive compared to gold. A good time buy silver is before the ratio falls further.
Recent price movements in 2024 show that silver is attempting to break through the $32.50 resistance level. If it does, another huge price surge could be triggered. Silver has the potential to see a rally in December, resulting in all-time high prices around $50. Analysts predict short term pullbacks in November could create ideal buying opportunities.
UBS analysts stated, “We see silver outperforming gold over 12 months, with the potential for its ratio to test the long-term average of just below 70x.”7
Conclusion
By all measures, silver is set to surge by year’s end. Following the trajectory of gold, silver could soon reach all-time highs. Silver prices have risen by nearly 35% since the start of 2024, breaching an 11-year high, surpassing $30 per ounce. For those looking to protect the value of their retirement funds with precious metals, now is an ideal time to add silver to their portfolios – especially in a tax-advantaged Gold IRA. Contact us today to learn how at 800-462-0071.
