Long known as gold\u2019s poor cousin, silver has responded to a run in precious metals inspired by geopolitical uncertainty, inflation and hopes of interest rate cuts.<\/p>\n
It\u2019s up 10% in just a week, rising from US$24.54\/oz to US$27\/oz as gold hit all time highs.<\/p>\n
Silver has, for years, been the province of internet weirdos. The silversqueeze sub-reddit has over 12,000 members and there\u2019s no shortage of Twitter experts with ambitious claims on how high the commodity can rise.<\/p>\n
#Silver<\/a> will go to $50 this year to finish the handle and then breakout towards $100+. https:\/\/t.co\/tsMcds7HBV<\/a> pic.twitter.com\/Z1UuRHllDJ<\/a><\/p>\n \u2014 Tim Hack (@realTimHack) April 4, 2024<\/a><\/p>\n\n Many silver optimists are even wilder. The metal hit records of US$48.70\/oz over a decade ago, but has been increasingly disconnected from its hombre the gold bar in recent years.<\/p>\n With prices in the doldrums there has been sparingly little silver exposure on the ASX outside of market giant South32 (ASX:S32)<\/a> and its high grade Cannington mine in north Queensland.<\/p>\n According to Adriatic Metals (ASX:ADT)<\/a> CEO Paul Cronin, whose dual ASX and London listed miner just opened the silver dominant Vares mine in Bosnia and Herzegovina, silver has typically traded at a ratio of 30 times lower than the gold price.<\/p>\n In the first half of 2023 it hit a historically high level of 83:1.<\/p>\n Silver has lagged gold heavily since the pandemic. Pic: LBMA\/Silver Institute<\/p>\n The US$189m development, which will ramp up to full-scale production in 2025, had a revenue mix consisting of roughly 50% base metals like copper and zinc and 50% silver and gold when it was in studies a couple years back \u2014 when Adriatic used spot silver prices of US$24\/oz as its benchmark.<\/p>\n Silver and gold now make up over 60% of its potential revenue mix, and Cronin says conditions are brewing for the metal to breakout even further.<\/p>\n \u00a0<\/p>\n Historically a precious metal used as a more affordable alternative to gold as a store of wealth, silver is increasingly becoming an industrial metal.<\/p>\n According to the Silver Institute, industrial demand accounted for 45% of silver demand by 2022, with a massive rise in use in photovoltaic solar cells and fast chargers for electric vehicles offsetting a collapse in silver use in photographic film.<\/p>\n Now major weaknesses in silver supply are emerging, Cronin said, with big deficits growing since 2020.<\/p>\n \u201cIf you look at the physical inventories being held in the LBMA vaults that\u2019s been shrinking, it\u2019s now at its lowest level in history,\u201d he said.<\/p>\n \u201cAnd then coupled with that, if you think back to February on the COMEX futures contract for March, you\u2019d normally see 99% of contracts get closed out before the end of the contract term. <\/p>\n \u201cBut we saw about 3% of contracts ask for physical delivery and for the first time ever COMEX had to send out a notice saying well, we can\u2019t do that sorry. <\/p>\n \u201cThey have delivered but now if you look at the May contract which is the next big contract month there\u2019s something like already three and a half per cent that have asked for physical, so there\u2019s a shortage basically. <\/p>\n \u201cI think silver miners know it and I think that fundamental shift in the supply-demand balance is really been driven by industrial rather than the precious metal value for silver.\u201d<\/p>\n Cronin thinks the need to increase EV charging times will be a big driver of silver demand.<\/p>\n \u201cIn 2022 for the first time we saw industrial demand for silver outplay the precious metal demand. We saw that again in 2023 (and) I reckon we\u2019ll see it in 2024 as well,\u201d he said.<\/p>\n \u201cAnd that is fundamentally being driven by two things, photovoltaic cells and high velocity electric vehicle charging.<\/p>\n \u201cAt each high EV charging point now you\u2019ve got about three ounces of silver in there, but on the ultra fast chargers, you\u2019ve got about six and that\u2019s driving it in my view. <\/p>\n \u201cI don\u2019t think these things ever go up in a straight line, we\u2019ll see a little bit of toing and froing as we always do in the precious metals markets, but it\u2019ll perform well.\u201d<\/p>\n Silver prices over the past 50 years and so far in 2024 (below). Pic: LBMA \u00a0<\/p>\n There are a number of analysts, especially in North America where silver deposits and pure play miners are more prominent, who are extremely bullish on the commodity.<\/p>\n \u201cSilver markets may be set up as the most exciting trade in the energy transition theme across the entire commodities complex today,\u201d TD Securities\u2019 Daniel Ghali said in a recent note. <\/a><\/p>\n \u201cThe energy transition is this decade\u2019s investment zeitgeist, and implications for silver are often overlooked.\u201d<\/p>\n That could see available stockpiles depleted far quicker than anticipated, especially if rate cuts from the Fed bring financial investors deeper into the market.<\/p>\n Adriatic\u2019s Cronin believes silver will rise at a quicker pace than gold, the latter also a bonus for the miner with its spot price currently up around US$500\/t on study numbers.<\/p>\n Supply challenges are increasingly being felt not through primary silver producers but at base metals mines where silver is produced as a by-product of zinc and lead. <\/p>\n Those commodities have struggled due to high interest rates, inflationary pressure and challenges in the Chinese economy, underlined by WA lead miner Galena Mining\u2019s (ASX:G1A)<\/a> decision to go into voluntary administration on Friday.<\/p>\n \u201cWhere we\u2019re going to continue to see a reduction in silver output is actually from those companies that have VMS deposits and those various deposits, in reality, are driven by zinc and lead,\u201d Cronin noted.<\/p>\n \u201cAnd while zinc and lead prices remain relatively low, particularly zinc, I don\u2019t see a huge amount of increase in silver production. <\/p>\n \u201cAs a result of that, I think you\u2019re going to continue to see silver prices march up.\u201d<\/p>\n As for those internet silver superfans, they may be looking a little more sensible in the years to come if those predictions hold.<\/p>\n \u201cOn silver, I think you\u2019ve now got a lot of buyside analysts scrambling to understand what just happened and why. You\u2019ve seen a few colourful characters out there for a while talking about the silver squeeze and what\u2019s going to happen in silver,\u201d Cronin said. <\/p>\n \u201cYou become kind of numb to that after a while because you just see the same stuff repeated over and over. But if you actually look at some of those guys that we probably dismissed a couple years ago as being a little bit up curve themselves, they\u2019re probably right. <\/p>\n \u201cSo, it\u2019ll be interesting to see how this plays out and interesting to see how sentiment responds to it. I think we\u2019ve seen a bit of that in the last couple of days. <\/p>\n \u201cI\u2019ve been surprised by the rate at which silver has increased, but I do expect it to continue to increase although on a far less aggressive basis.\u201d<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post Has the moment finally arrived for the #silversqueeze bros?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Silver in high demand, short supply<\/h2>\n
\nPic: LBMA<\/p>\nWhere could prices go?<\/h2>\n
Adriatic Metals (ASX:ADT) share price today<\/h2>\n\n
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