Silver is an essential component in many industries. Next to petroleum, silver is the most used commodity for industrial purposes. Its unique properties make it nearly impossible to substitute and its uses span a wide range of applications. Silver was a recent recipient of internet hype. This is exciting for the trader, but for wealth preservation, short-term hype is secondary to market fundamentals. Physical silver is still 80% off its 2011 high of $49.25 even as its price has increased 90% since January of 2020. In this week’s article, we look at the fundamentals of silver going forward.
Physical supply for silver coins and bars is extremely tight
Demand for silver coins was up 62% in 2020 for US dealers. According to our silver contacts in London, many dealers ran out of silver coins recently. Many dealers here in the US are out of physical silver or it is on significant delay. The US Mint recently stated it could not keep up with Silver American Eagle demand and the Royal Canadian Mint has had all new silver shipments delayed. Young people are pushing silver higher because that’s what they can afford, and they are hip to the scene on trading apps. The thinking that if all silver ETFs are forced to deliver the actual metal; the price will be pushed up significantly. This will be much harder than pushing up a stock with a thin float and large short position. The SLV comprises 70% of known silver in ETFs. There is no substitute for physical silver. Silver Eagles, Philharmonics, Maple Leafs, Britannias, silver bars, Morgan Silver dollars, Peace dollars, and 90% silver are all traded and inventoried by Midas Gold Group. Premiums have expanded as demand far outweighs supply. Customers better get their physical silver while they can.
The industrial uses for silver aren’t going away
Silver is found in almost every computer and mobile phone. Automobiles and appliances contain silver. Because of silver’s high electrical conductivity and durability, it is essential in solar panels and printed circuit boards. Silver can be painted on any non-metal surface, eliminating the need for wires. RFID chips consist of sprayed on silver. Silver is malleable and ductile. Silver also exhibits the unique property of penetrating bacteria cell walls—while not harming mammalian cells—and destroying the ability of the microbe to reproduce. This allows silver ions to be employed as a biocide, which is growing increasingly important as overuse of chemical antibiotics is causing some bacteria to become immune. Silver is also found in jet engines, long-life batteries, 3D printing, water purifiers, laundry detergent, and photography. The need for silver for industrial uses in 2020 gained significantly. Sprott Asset Management predicts that there will be a 50 million ounce deficit of silver supply between now and the end of 2021. From ethylene oxide and plastics to electronics and nuclear energy, researchers will continue to find new applications that leverage silver’s unique properties.
Physical silver is still real money
Silver may not be part of our currency system, but it is still real money. Silver can’t be created out of thin air like paper or digital forms. It can’t be printed out of thin air and devalued immediately by creating supply with a push of a button. If you hold physical silver, you don’t need another party to make good on a contract or promise. Stocks, bonds, or virtually any other paper investment don’t share this characteristic. If you own silver in your possession, there is no default risk. Physical silver is also a tangible hedge against all forms of hacking and cybercrime. Silver is practical for small purchases and is a fraction of the price of gold. You can own roughly 50 ounces of silver for every ounce of physical gold. Since 2015, the silver mine supply has been falling. Exploration and development of new silver mines has to be affected by Covid and other factors. Scrap silver since 2011 is also falling. Silver output has been close to full capacity for years and world demand is growing. Expect silver values to rise over the long run and eventually hit triple digits. Physical silver is a buy on price pullbacks.
As stated in a June 2020 Midas Gold Group article:
“The US dollar has started a steep fall in value. As debt piles on and as money is created out of thin air, paper assets lose value. Every investor is unique with their war chest to protect. Silver offers the potential for huge returns and also represents a possible more affordable form of protection for some investors. The knock on silver has always been it is just an industrial metal too volatile and inconvenient to store or transport. Yes, it is extremely heavy and difficult to own for those who move around a lot. For those willing to push aside those inconveniences and the future price volatility, silver could be one of the better opportunities for the next decade.”
Since then silver has appreciated significantly and the physical stockpile of silver to own has tightened.
Call Midas Gold Group today at 480-360-3000 or 805-601-6000 and see what silver allocations could be available. Silver is allowed in a retirement account or some investors may choose to load up their gun safe or basement. Midas Gold Group would encourage you to get some money out of the banking system or financial markets while you can. The upcoming financial storm is approaching and could arrive at any time. Once it starts it will be too late for most investors to get out. Take that first step today to protect what you have worked so hard to build up. Your assets are better off in your possession than to have the market take it!