As people are flocking to gold as a safe haven in 2024 many are missing its little brother. The manic depressive that usually dwarfs gold on the upside in bull markets. Now silently creating an enormous base with an astronomic potential for upside. Perhaps the biggest sleeper of all, silver.
Silver is old money
The Lydian silver staters were minted by King Croesus of Lydia (modern-day Turkey) around 550 BC. The first actual coins known to have circulated as money. And while Isaac Newton’s creation of the gold standard in the 18th century shifted silver’s role as the dominant monetary metal, its legacy endures as the “money of the people”.
Industrial plus monetary demand
With industrial applications accounting for around 50% of silver demand and the remaining 50% coming from its monetary demand, silver’s dual role sets it apart from gold, which primarily serves as a monetary metal and a store of value.
Sectors like solar power, electronics, and electric vehicles are in great need of silver, which positions the commodity for long-term price growth, solely based on its industrial demand. As governments focus more on renewable energy, silver’s role in photovoltaic cells for solar panels, the expansion of electric vehicles (EVs) and 5G networks will continue to drive demand higher.
Safe haven of the people
Like gold silver is a safe-haven asset and can be used as money. It remains strong and stable in times of economic uncertainty. When inflation rises silver is an attractive hedge. It is more affordable than gold which makes it more accessible to smaller investors and regular people.
Gold-Silver Ratio: Uncovering Value
The gold-silver ratio continues to signal undervaluation. Historically, this ratio has averaged closer to 50:1 but is now standing at 80:1. That gap normally narrows during the later stages of precious metals bull markets, where silver tends to outperform gold. If silver comes out of its long sleep and the ratio normalizes it would dramatically outperform gold.
Bullish technicals: Moving Averages and RSI
Silver’s technicals are flashing bullish signals both in the medium to long term. The 30-week moving average has been evening out and starting to trend higher since around 2020. This can often be a precursor to a sustained uptrend over the long term. Additionally, the Relative Strength Index (RSI) is in neutral territory on the weekly, suggesting that there’s more room to the upside.
Historical Comparisons
When comparing the current chart to past bull markets, particularly on a logarithmic scale, silver’s price pattern indicates a potential rise to $50. Perhaps first testing its previous high at 50 dollars, where it has overhead supply, then fall back a bit and keep rising again into the late 2020s and into the 2030s. Possibly north of a 100 dollars and above. This would be similar to previous moves in precious metals bull markets percentage-wise.
The longer the base the higher in Space
The most exciting chart to look for regarding silver is the very long term chart. Silver is building a gigantic base with a huge potential for upside into the coming decades. Long time sideways patterns are usually the biggest winners on the upside when they eventually break out. The chart below demonstrates this on a monthly bar chart:
Inflation hides the secret to silvers rise
On an inflation adjusted long term chart silver looks even more promising. The inflation adjusted highs in the 1980s, are above 140 dollars, suggesting that the upside could be much higher than 50 based solely on inflation.
Russia is hoarding silver
Russia has been steadily increasing its purchases of gold for years now. But now for the first time Russia is also buying silver on a big scale for their state fund. Russia has stated that these acquisitions are meant to protect its national wealth from Western sanctions and insulate its economy from the U.S. dollar hegemony. This move will squeeze down the global supply of silver even more.
China
Being one of the world’s largest producers and importers of gold, China has been quietly expanding its reserves of gold and silver. Both Russia and China seem to recognize the long-term strategic value of precious metals, which further emphasizes the critical role precious metals is likely to play in the coming decades.
Growing Supply Deficits and Long Permitting Timelines
The current supply deficit in silver is one of the largest in history. The deficit is exacerbated by the fact that silver mines take years, or even decades, to permit, develop, and bring to production. Unlike commodities with simpler permitting processes, silver mining projects face lengthy approval timelines due to stringent environmental, regulatory, and social considerations.
Analyst price predictions
Analysts are increasingly bullish on silver. For instance, Keith Neumeyer of First Majestic Silver has speculated that a triple-digit silver price is achievable within the next several years. Long-term forecasts like that of PricePrediction.net goes even further, suggesting that digital silver proxies like Kinesis KAG, which follow the silver price, might reach a whooping $23,000 dollars by 2040.
How to Invest in silver
Investing in silver can be done several ways, depending on an investor’s goals and risk tolerance. For direct ownership, buying physical silver in the form of bullion coins or bars is a popular option. Exchange-Traded Funds (ETFs) offer another route. These allow investors to gain exposure to silver prices without needing to store physical metal, with some ETFs backing shares with physical silver.
For leverage on the silver price, mining stocks and junior silver miners tend to be more volatile but can deliver substantial returns above the underlying commodity price in bull markets. Digital silver options, for example Kinesis KAG, a silver-backed cryptocurrency, offers flexibility by allowing investors to own silver on the blockchain via cryptocurrency. Finally, options and futures contracts are available for seasoned investors who want to actively trade silver.
Importance of the long term
It’s important to note that this analysis focuses primarily on silver’s long-term potential, over the next decade or more. While silver may experience short-term volatility, the technicals and fundamentals are bullish on a broader longer timeframe, and the charts indicate that a larger structural move is coming.
Conclusion: Silver has a Bright Future
Silver is facing one of the largest supply deficits in modern history while lagging behind gold in price. Industrial demand, supply constraints, the gold silver-ratio and the charts all points to the upside. As the precious metals market heats up, silver could very well be its biggest winner.
Disclosure: I am long silver.
See also:
For more analysis on silver, check out this article.
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