This basic factor could drive up the prices of silver
There is a perfect storm brewing in the silver market. Silver prices seem cheap right now. If you ignore the gray precious metal, you could be making a big mistake.
It is important to know the supply and demand of the silver market. Demand is made up of industrial buyers and investors. The offer consists of silver miners and a few recyclers. At present, supply and demand are completely skewed.
Demand for silver remains robust
Looking first at the demand side …
We are emerging from a massive crisis – the COVID-19 pandemic – and life is returning to normal. With this, we are expected to witness an explosion in production in the near term. It would not be shocking for industrial demand for silver to become above normal in the coming months and quarters.
But remember, money also has an investment demand. And currently, the investment demand for the gray precious metal is strong.
Consider this: In the first four months of 2021, the US Mint sold 13.1 million ounces of silver in American Eagle coins. (Source: “Bullion sales”, US Mint, last accessed May 6, 2021.)
During 2019, the Mint sold 14.8 million ounces of silver in American Eagle coins. It doesn’t have to be rocket science here: After just a few months of 2021, US Mint silver sales are approaching full 2019 sales.
In 2020, the US Mint sold over 30.0 million ounces of silver in American Eagle coins. During the first four months of this year, the Mint had sold just over 10 million ounces of silver in American Eagle coins.
To sum up the demand side of the silver market: it looks robust and it looks like things could get a lot better.
Supply side problems continue
If you look at the supply side, there isn’t really a lot of money being produced.
In recent years, miners have struggled and, most recently, silver prices have reached a level where miners have a “breathing space” (they can produce money profitably) . But they’re not reporting huge increases in production just yet, at least far from what the numbers look like on the demand side.
Lots of silver miners were struggling over the past few years. They haven’t spent any money on exploration either. This created a lot of problems for future production.
Basic economics suggests silver prices could rise
Dear reader, I have been bullish on silver for years. Now my beliefs are getting stronger.
My reasoning is very simple: demand is very strong while supply struggles. In recent years, the silver market has experienced deficits: demand has exceeded supply.
Like I said earlier, there is a perfect storm in the silver market, and hardly anyone is paying attention. The basic economy is at stake here: as demand is high and supply is struggling, silver prices could go much higher.
There is a lot of noise these days. Don’t be lured in by investments that reach unprecedented heights. Pay attention to opportunities like money. The metal is undervalued and overlooked, and the case for rising silver prices continues to strengthen. Investors who are there early could make obscene returns.