Massive disparities ahead and bull case now stronger

0

Silver Prices Are Lagging Right Now, But Next Years Could Be Stellar

In the current commodity super cycle, there is one metal that has lagged behind the others: silver. While commodity prices like oil, wheat, gold, nickel and copper remain high, the price of silver has really underperformed. That might not stay the case for too long.

If you look at the long-term silver price chart, you will see that the price of the gray precious metal is well below the highs it reached in 2011.

With all of this, one might wonder if the money is still worth looking at. If silver prices have not changed much in recent years, what are the chances of a rise in the years to come?

Here’s what investors need to know: Silver remains undervalued and grossly neglected. Suppressing silver prices over a long period of time will only make silver a better opportunity. Patient investors could reap immense rewards later. The next few years could be stellar for the price of silver.

Massive Disparity Ahead For The Silver Market: Here’s Why

Dig deeper…

It is important for investors to look beyond the current price of silver. The price you see right now is a reflection of what investors are thinking right now, mixed with the noise and current market conditions. As an investor, you have to watch what lies ahead.

The silver market could see massive imbalances in the years to come. Money-producing businesses (there are very few of them) face significant challenges. Their production costs have skyrocketed.

Take a look at First Majestic Silver Corp. (NYSE:AG). In the first quarter of 2022, the company said its all-in sustaining costs to produce one ounce of silver equivalent was just over $20.00. In the fourth quarter of 2021, these costs were $17.26. (Source: “First Majestic Reports First Quarter Financial Results and Quarterly Dividend Payment”, First Majestic Silver Corp., May 12, 2022.)

Mind you, this sort of thing is prevalent among top money makers across the board. Fuel and energy costs have skyrocketed and labor shortages have created serious constraints.

A basic rule of economics is that when the price of a good is high, producers tend to produce more. When the price of a good falls, producers tend to produce less (or not at all, if it is not economically possible to produce that good).

We could be getting closer to a point where silver companies are struggling to justify production increases as their expenses keep rising.

Silver demand remains strong

Market demand for silver is robust.

Silver has an immense number of industrial uses. It is used in solar technology, pharmaceutical industry, electronic gadgets, computer chips, etc. The world is moving towards electrification, and money plays a very important role in it. Beyond its industry-related demand, silver has strong investment-related demand. The metal is sometimes called the poor man’s gold. Silver prices have a strong correlation with gold prices; if gold goes up, silver goes up too.

Don’t just look at what happened in the silver exchange-traded funds (ETFs); watch silver bullion sales in currencies around the world. There is currently a mini cash rush going on, to say the least.

The case for owning money grows stronger

Dear reader, just like gold, silver doesn’t get much attention in the mainstream media these days. Silver prices that remain stable also make the metal unattractive for many investors.

Nonetheless, I continue to be bullish on silver. I wouldn’t be shocked if there was a massive shortage of silver in the coming years as the basic economy plays with suppressed supply and growing demand. If that happens, mainstream pundits will be surprised, as they were when oil prices shot up due to years of underinvestment in oil projects and all of a sudden there was no supply. not enough to meet demand.

If silver prices had behaved well in recent years, I wouldn’t call it a shortage. There would be money for new projects and silver explorations. In the current commodity super cycle, silver has lagged behind and could outperform other commodities in the years to come.

As such, the silver drop could be much smaller and the upside could be immense. Silver prices could double from their current level and still be correctly priced.

I also think the actions of the silver miners might be worth looking into. Silver mining companies will benefit the most from a higher silver price, and their stock prices are likely to reflect this.


Source link

Share.

Comments are closed.