Tormented Market Conditions Could Send Silver Prices Soaring
Since the beginning of 2024, silver prices have surged by more than 22%. This is an impressive increase in just a few months. However, it might just be the trailer for what could be ahead for the gray precious metal. It wouldn’t be shocking to see the price of silver make a run toward its all-time high of around $50.00 an ounce—if not higher—in the coming months and quarters.
Why have such a bullish outlook on silver prices? There’s actually a very simple reason behind it: the silver market’s basic fundamentals are tormented. The supply side continues to struggle, but the demand side remains resilient.
Basic economics states that when the supply of something struggles and the demand is strong, its price goes higher.
Now, some perspective…
In the first five months of 2023, the U.S. Mint sold 8.24 million ounces of silver in American Eagle coins. In the first five months of 2024, this figure was 12.55 million. (Source: “Bullion Sales,” U.S. Mint, last accessed June 18, 2024.)
That means the silver demand at the U.S. Mint increased by more than 52% year-over-year.
For the entire year of 2023, the U.S. Mint sold 24.75 million ounces of silver in American Eagle coins. In the first five months of 2024, the mint sold more than half of what it did in the entire year of 2023!
Silver Market Remains in Deficit for Several Years
What I’ve described above is just a glimpse of what’s been happening in the silver market. The top-level figures are mind-blowing, to say the least.
Between 2019 and 2023, the silver market had a deficit. That means the demand was higher than the supply. (Source: “Silver Supply & Demand,” The Silver Institute, last accessed June 18, 2024.)
The market deficit is expected to continue in 2024. For the entire year of 2024, the silver supply is expected to be a little over a billion ounces, but the demand is expected to be around 1.22 billion ounces. That would mean a deficit of well over 200 million ounces!
Outlook for Silver Prices Is Rosy
Dear reader, given what’s been happening in the silver market, it’s not an out-of-the-world idea to think that silver prices could make a run toward their all-time high. It’s possible that it will happen much sooner than expected if the current market conditions persist.
I think, in the next few years, it’s likely that the supply side of the silver market will struggle a bit more. This could happen mainly due to the cost of producing silver. Across the board, silver production costs have increased, which could make silver miners rethink their production levels. Plus, miners have really lagged behind in investing in future production.
I also think that the demand side could get a lot higher. Note that silver has industrial uses; the metal is critical for some technologies, especially solar. Once the supply side shows signs of stress, it’s possible that industrial producers and other end users of silver will rush to buy more of the metal.
Moreover, if gold prices continue to trend higher, I think silver could become a favorite of investors, too. After all, the price of the gray precious metal has a high correlation with the price of gold.
I will end with this: silver remains undervalued and ignored. Investors who are patient could reap immense rewards.