In this post, we’re going to discuss whether a silver shortage persists and probably more importantly, whether we will see one soon.
Simply stated, it appears that there is not a significant silver shortage on the investment side. Keep in mind that silver is used for both industry and investment. We know that on the investment side of things, there still doesn’t appear to be a big increase in silver premiums at major bullion dealers, so a shortage doesn’t seem like it is currently happening.
That said, by all accounts a shortage in silver in the future seems all but given. This is really driven by industry. We’ve seen the last few years that there have been silver deficits on the industry side. The silver institute has put out a report highlighting the imbalance between silver supply and silver demand. This mainly being driven by the rapid demand increase from the Photovoltaic market, or solar power industry. By some accounts, the number has increased by 70% from 2023 to 2024.
Not only is demand increasing, but supply is decreasing as well. It’s reported that mining production fell by around 1-2 percent.
After accounting for industrial demand, there’s around 123 million ounces of silver left for investment. This comes out to around 3 billion dollars which is a quite small when you think about it.
This raises the question, when will the silver shortage become apparent?
It seems like to me, that this is already started, albeit the situation is not severe just yet. I think it will become more and more with each year, especially if the price stays at such low level. It’s really incredible that with such a supply imbalance, silver price hasn’t jumped to $50 or $75 dollar an ounce.
Of course, we all know why this hasn’t happened: Futures Market. In my opinion, Exchanges like the COMEX have been able to suppress the price of silver with a variety of trading methods. Things such as naked shorts, where traders can sell silver contracts although they don’t actually own the silver drive down the price. In addition, we see illegal actions like Spoofing occur. I’ve done a few pos detailing these in the past (Read About that here)
Overall, we see that more silver is being traded in these markets that exists.
It’s not just a little either, there’s more silver traded in a day than mined in an entire year. The numbers are truly staggering.
What will make silver price realize its true value?
In my opinion, when investors flood the retail market. This will create supply shortages, and many will begin to sell to retail dealers rather than industry.
For example, if Silver is $30 an ounce, but retail demand spikes we can expect premiums to go up. We could easily see American Silver Eagles go for $50 or $60. If a mining company can sell to retail for $40, why would they sell to industry at $30?
I expect more and more people over time will begin to start divesting from traditional assets as the weaknesses in the US dollar are persistent.
One argument around the US dollar moving forward
Some believe that the US dollar will actually benefit from the global debt crisis, that they ironically really created. The argument goes something like this. Smaller countries with tons of debt will begin to experience severe economic issues as their bond yields will spike and they will be forced to print. Not having the luxury of being the world reserve currency, these countries will adopt the US dollar. This of course would help the US dollar.
I don’t think it’s going to happen this way though. I think many countries will realize our issues and decide to go with something else. If the BRICS currency is up and running many will go that route. Or another option could be reissuing their currency but backing it with precious metals. One other alternative is that the country will adopt bitcoin.
Will we see a move to a gold standard?
I believe in the future some country or group of countries like the BRICS will move to some type of asset backed money standard like a gold standard. It might not be completely gold, or the money might just need to have a percent of gold backing it.
What we’ll see is that as more inflation ensues and more currencies fail, there will be outrage from the general public. It probably will start outside the US, but eventually the US will experience the same outrage eventually.
