Commodity Trade Mantra

Silver is in a Sweet Spot and This Trend can Continue

Silver is in a Sweet Spot and This Trend can Continue

Silver is in a Sweet Spot and This Trend can Continue

Between Jan. 1 and July 11, the price of silver increased 44.7%. But can the white metal maintain its bull run? A prominent mining CEO thinks it can – and will.

Mining, Inc. CEO Mitchell Krebs told Kitco News that he expects the precious metals sector to attract even more investor interest through the second half of this year. Krebs, who also serves as president of the Silver Institute, went on to say he thinks silver sits in a unique position to outperform as it benefits both as a monetary metal and an investment metal:

I think, right now, silver is in this sweet spot and I think this trend can continue.”

The growth in solar power is helping drive the demand for silver upward. Krebs said solar panel production could potentially gobble up to as much as 25% of the global silver market in the near future:

You look back a decade ago and around 5 million ounces of silver was used in solar panels. This last year, I think it was 75 million ounces. Every new gigawatt of photovoltaic capacity that is installed consumes almost 3 million ounces of silver.”

Krebs also noted that the industrial market for silver has grown much more balanced compared to a few years ago when photography served as the primary driver. More and more uses for the white metal are being developed, from high-tech electronics to biomedical applications:

Silver is so unique because of the new uses people keep finding to more than offset the losses from photography demand. The market is a lot stronger and more diverse.”

Silver isn’t dependent on industry alone. In fact, its value as a monetary asset overshadows its industrial applications. Investor demand for silver is expected to continue breaking records through the rest of the year. Economic uncertainty in the wake of Brexit and other global concerns, along with the proliferation of negatively yielding bonds makes silver even more attractive to investors:

There are no two ways about it; investors just want precious metals right now. Gold gets a lot of attention, but silver, with its price point, attracts a lot of average investors. In the US, there is almost an insatiable appetite for silver coins.”

On the other side of the supply/demand equation, shrinking supply will also likely put upward pressure on silver prices. High demand coupled with slowing production resulted in the third consecutive annual silver deficit in 2015. The gap between silver supply and demand was 60% larger than 2014. Mine production growth slowed to 2% last year. Scrap sales were also weak.

Krebs said this year could mark the first actual decline in production after more than a decade of growth. With companies cutting back on exploration and production, it could take up to three years for new supply sources to come on line:

You put the supply picture up against some of these positive demand characteristics and it sets up really nicely for gold and silver — especially silver.”

Krebs isn’t the only mining CEO bullish on silver. First Majestic Silver Corp. CEO Keith Neumeyer said he thinks we’ll see triple-digit silver in the near future, projecting $140 silver by 2019.

Gold tends to get hog the spotlight, but this also appears to be a good time to buy silver.

 

 

 

Courtesy: Samuel Bryan

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