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Gold set multiple records last year while silver remained well below its all-time highs. This created the impression that silver underperformed even though it was up over 20 percent. But we're starting to see some bullish sentiment for silver, even in the mainstream.
In fact, some people are projecting 2025 could be silver's year to shine.
In this episode of the Money Metals' Midweek Memo, host Mike Maharrey explains why the supply and demand dynamics, along with technical indicators, justify this bullish sentiment.
Mike opens the show talking about an old photo he recently ran across.
"I was wearing a T-shirt that said, 'The Future’s so bright I gotta wear shades.' I also had hair in that photo, which was fun. Anyway, as I was thinking about doing a show focusing on silver, it occurred to me that the t-shirt slogan might be applicable. There are a lot of people who see a really bright future for silver. And right now, in particular, there’s even some mainstream bullishness."
Mike notes that one of the primary reasons for this bullishness is rapidly increasing industrial demand. This is being driven by a big uptake in silver consumption in the renewable energy sector - specifically solar.
"I’ve been bullish silver for a while because it seems way underpriced given the supply and demand dynamics, and as I said, the mainstream seems to be moving in that direction."
Mike acknowledges that renewable energy can be a controversial topic given how it has been politicized. But he argues that in and of itself, clean energy isn't a bad thing, even if you don't believe it is going to "save the planet."
"Here’s the thing…no matter what you might think about it; green energy is here to stay. Like it or not, green energy is going to be pushed and subsidized. And that’s good for silver."
Mike explains why silver is so important in the solar sector, and he also notes that the advent of AI will likely create similar demand dynamics.
Projections are that industrial silver demand topped 700 million ounces last year for the first time. The problem is supply isn't keeping up. We've seen several years of structural market deficits, meaning more silver is being consumed than produced.
"That means silver users are having to tap into above-ground stocks. This is basically silver sitting in vaults – primarily on the investment side of the coin. In order to free up these stocks, the price of silver has to rise."
Meanwhile, mine production peaked in 2016. Mike explains the dynamics in the silver mining sector and why supply is having a hard time keeping up with demand.
Industrial demand accounts for between 50 and 60 percent of overall silver offtake, but silver is still fundamentally a monetary metal. It tends to track with gold over time.
"If we are going to accuse silver of being a laggard, I think that’s due to softness on the investment side of the coin. Investment demand for physical silver is the only market segment expected to contract in 2024. It is forecast to fall by 15 percent to a four-year low of 208 million ounces."
Mike notes that lagging demand is primarily concentrated in the West.
"If you’re bullish on gold because of the fiscal mess we’re in and the Fed’s monetary malfeasance, you should be bullish on silver as well. Because, historically, silver has outperformed gold in a gold bull market. But this typically happens in the latter stages of the gold bull run."
Not only do the supply and demand dynamics point to a possible silver price rally but there are some technical indicators in play as well.
For instance, the gold-silver ratio has surged to over 90-1.
"This indicates that silver is extremely underpriced from a historical perspective. In other words, silver is on sale."
Mike provides an overview of the gold-silver ratio and why it matters.
"From a historical perspective, when you see gold-silver ratios well above the historical average, it tells you that silver is underpriced compared to gold and there is a strong possibility that silver will go on a bull run to close that gap. Historically, this has often happened in the midst of a gold bull rally, with silver outperforming gold."
Mike makes one final point to consider.
"I always find it interesting when the mainstream people start to sound like me. And I’m hearing a heck of a lot of chatter about silver. And here’s another important point. These mainstream analysts aren't factoring in any kind of economic chaos, which is entirely possible given the Catch-22 facing the Federal Reserve's monetary policy."
Mike closes the show with a call to action.
"There are reasons to like silver right now, especially at around $30 an ounce. As I said, the signs point to silver being on sale..."
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