Silver’s Positive Fundamentals Due To Strong Demand In Key Growth Industries
– Increased efforts in green energy and advanced technology set to boosts silver’s demand
– Four-year supply deficit set to increase due to fewer mine openings and discoveries
– Bank manipulation may be why silver under performing
– TD Securities and the Bank of Montreal expect silver to be best performing precious metal in 2018
– Growing industrial demand combined with monetary safe haven makes silver an excellent diversifier
The beauty of silver is its dual role. It is both a monetary metal and an industrial metal. Because of this investors can look to a positive few years as the metal’s fundamentals will thrive due to strong demand in major growth areas.
Over 50% of silver’s annual demand comes from industry. This is set to continue to grow as high-growth industries such as self-driving cars, green energy and health care drive demand for the precious metal.
The majority of industries are looking at improving products with technology and boosting energy efficiency. Many solutions call for silver, a tricky solution given the ongoing supply deficit.
Along with silver’s growing importance in the world of manufacturing we should also remember its importance when it comes to its role as a monetary metal. Government and central bank policies will continue to increase budget deficits and drive inflation which is positive for both gold and silver.
The tables look set to turn for a precious metal that is able to serve us both in our portfolios and our day-to-day lives.
Go silver to go green
“To go green, to do all the things we want to do as the human race gets off oil and gas, we need a ton of silver,” Keith Neumeyer, CEO of First Majestic Silver Corp
Silver has enormous potential in the field of technology. It is the most electrically conductive known material other than gold. Unsurprisingly gold is far too expensive to use in the majority of areas where silver makes for a viable alternative. As we find more solutions to solve energy and technology issues we will inevitably require more and more silver. Right now there is no obvious substitute for it.
Consider the drive for technological solutions in increasing populous and economically developing areas. For example, even the poorest cities have high smart-phone concentrations. So much of a smart-phone’s workings are thanks to silver. This demand is not set to go anywhere but up. Silver is a very limited commodity, mined as a by-product more often than not. As the world goes crazy to stay online, demand for silver will also go crazy.
This isn’t just about staying connected but it is also about finding improvements. Consider silver’s anti-bacterial and reflective properties in everything from hospital paints to solar-windows.
Much of these ‘green’ technologies, such as solar-panels had costs that were so high that adoption was minimal. But, prices are dropping (by as much as 9% in some cases) which is driving up demand. This inevitably means more silver.
We are also becoming more safety conscious, increasingly keen to place our faith in technology over human-ability. Rear cameras, night vision, rear-object detection and lane departure warnings are each examples of new car-technology that relies on silver.
All of this increased demand is fantastic for the silver market and for the overall push towards more efficient technology, but it might not happen so easily. For the past four years there has been a supply deficit in the silver market. This is thanks to the reduction in opening of new mines and discovery of silver deposits.
The price is far too low given these difficulties as well as increasing political risk around silver mining. There will be a breaking point.
Gold-silver ratio signals a turn-around
Currently precious metal fans might be feeling down about silver. At present the gold-silver ratio is around 79. The 100-year average is 40. The industrial precious metal is arguably due a much needed catch-up given its serious underpricing.
In 2017 gold has outperformed silver most likely because of strong safe-haven demand. But, this may well reverse next year as ongoing improvement in the global economy boosts silver’s industrial demand.
Karen Jones, technical analyst at Commerzbank, recently explained how she expects the gold-silver ratio to improve significantly.
Jones’ analysis explained that the ratio has broken above a 2016-2017 downtrend and her first upside target is at 79.44.
“I don’t know if the gold-silver ratio will get back to its 2016 high, but I wouldn’t rule it out…79.44 represents a significant resistance point.”
There are major frustrations surrounding the price of silver. Many struggle with the fact that not only is the global economy seemingly improving but there is also demand for financial hedges, such as gold and silver. Yet the price of silver remains subdued when compared to the likes of gold and other major economic indicators:
This is most likely down to manipulation.
Since 2003, we have believed and written about how the silver and gold markets are manipulated and “fixed” by banks. Just under a year ago our beliefs were confirmed when we revealed that leading bullion banks were working to fix the silver market:
Now we have definitive proof and the smoking gun that the “silver market mafia” in the form of leading bullion banks – such as Deutsche Bank, UBS and HSBC – were coordinating the manipulation of the price of silver and suppressing prices as alleged by the Gold Anti Trust Action Commitee (GATA).
While this is a joke to the young, naive, greedy and overpaid traders, it is important to remember that this is not a vic