Category Archives: silver-rounds

LilliDayYou simply can’t raise rates the most in recent history at the fastest pace in recent history on the most debt outstanding in history and not face consequences.” – ZeroHedge There has been a noticeable change in the tone of the markets and the economy over the past few days as the drums of recession are starting to bang louder despite investors continued dreams of a ‘soft landing’. Here are some items I was watching that seem to be screaming that the probability of an upcoming recession is much higher than the current market is pricing in. Labor Market Is Rapidly Deteriorating: Let’s take a look at some of the recent data points showing rapid deterioration in the labor market. Today’s BLS Jobs report came at 142,000 positions added, some 20,000 lower than the consensus. In addition, both June and July BLS jobs numbers were revised lower by some 86,000 positions in total. Seeking Alpha The March 2023 through March 2024 job creation estimate was revised down late in August by the Bureau of Labor Statistics or BLS by 818,000 or 31% of their original estimation. Wednesday’s JOLTs report showed the fewest amount of job openings in the U.S. economy since January of 2021. Federal Reserve Bank Of St. Louis A miserable Fed Beige Book Wednesday as it related to its labor component. Julia Pollak – Chief Economist at ZipRecruiter Layoff announcements in August hit 15 year high for the month Hiring plans in August were down 21% from August 2023. YTD hiring plans of 80,000 lowest since 2005 Thursday’s August ADP jobs report shows only 99,000 positions, far below the 140,000 consensus. Finally, the unemployment rate in July BLS jobs report ticked up to 4.3% from 4.1% in June and just 3.5% in June of 2023. It did tick down to 4.2% in August, but we are still in violation of the Sahm Rule, which has reliably happened before previous recessions. Claudia Sahm/Goldman Sachs Global Investment Research Commodity Prices Falling: Oil price per barrel – WTI (MarketWatch) Commodity prices also appear to be signaling recession is dead ahead. Oil has sold off sharply recently and is now down for 2024, and right at its lows for the year. Not even a delayed in a planned OPEC production hike earlier in the week could bolster crude oil. And this is with continued tensions/conflict in Ukraine, Yemen and between Israel and Iran. Copper price per lb. (MarketWatch) ‘Dr. Copper’ is also signaling slowing economic growth, and the red metal is down some 20% from its recent highs in mid-May. Earlier this week, Goldman Sachs slashed its projection for the average FY2025 copper price by $5,000 a ton because of a slumping Chinese economy. Lumber prices have also tumbled. InvestingChannel Yield Curve Is Normalizing: Charlie Biello (09/04) – Chief Market Strategist @ Creative Planning Finally, earlier this week, the spread between the two and 10-year Treasury yield ‘normalized’ very briefly for the first time since June of 2022. This has been one of the longest yield inversions in U.S. history and this is something I am watching closely. It has signaled hard economic times are coming many times historically. One of the first articles I remember reading on Seeking Alpha back in early 2007 was around, warning how a prolonged inverted yield curve produces a subsequent recession. Let’s just say that observation was prescient and, unfortunately, largely ignored. In late August, I put out a piece entitled ‘Five Market Predictions For September’. One of these was that the Federal Reserve would be forced to cut the Fed Funds rate by 50bps because of a fast-deteriorating labor market. That was a bit of an outlier as far as predictions go at the time. However, according to futures this week, it is basically a coin flip whether Chairman Powell will cut 25bps or 50bps at the upcoming FOMC meeting. Hulbert Ratings In summary, the chances of a recession have grown significantly in recent weeks. And with the market trading at some of the same extreme valuation metrics it was at the beginning of 2022, before a huge whoosh down for equities that year, investors are not probably pricing in this potential scenario. Continue reading →

Martin Ruegner/DigitalVision via Getty Images 25bp or 50bp debate remains unresolved The jobs report provides a real mix of numbers that does little to resolve the debate over whether the Fed will cut rates by 25bp or 50bp on 18 September. We have a 50bp in our forecast, but it is a low conviction call made on the basis that inflation fears have receded, and the Fed will want to get ahead of labour market weakness, which we think will become increasingly apparent in the months ahead. US non-farm payrolls change including provisional downward revision line (000s) Source: Macrobond, ING Payrolls continue to soften, but remain positive In terms of the August numbers, headline non-farm payrolls rose 142k versus the 165k consensus, so a slight downside miss, but there were 86k of downward revisions to the past two months. We are seeing consistent downward revisions to the data now, and that doesn’t even include the provisional benchmark revisions released a few weeks back that showed the BLS overestimated payrolls growth by an average of 78k per month in the 12 months to March 2024. For example, June was initially reported at 206k, to be revised to 179k last month, and now is just 118k, while July was revised down to 89k to 114k. Given that, can we really trust today’s number? Do we need to knock 78k off the headline figure to take account of the error in the BLS model? – that would give payrolls growth of just 64k. On the positive side, we see that the unemployment rate has dipped back to 4.2% after rising from 4.1 to 4.3% last month. Yet the underemployment rate rose to 7.8% from 7.9% so there are a growing number of people that are working part-time, but want to work full time. In this regard, the details show manufacturing looking very weak (-24k). Retail and temporary jobs have fallen for three straight months, and IT jobs have fallen or been flat for five months. The strength continues to be government (+24k), leisure & hospitality (+46k) and private education and healthcare services (+47k). These are sectors that are typically lowered paid, less secure and more part-time. As such, I would argue that the details are weaker than suggested by the headline; the typical sectors I would associate with a strong, vibrant economy are not performing (business services, manufacturing, transport and logistics, tech, etc). Are we losing the “good jobs”? Moreover, the chart below does not look good. Full-time versus part-time employment is showing a big divergence, which tallies with the idea that the US is adding largely lower-paid, part-time jobs and is losing full-time, well-paid jobs, primarily through attrition – not replacing retiring or quitting workers. Every recession starts this way, unfortunately. The easiest way to cut costs is not to replace workers, but if everyone is doing that, then the economy slows, and companies start making actual cuts down the line. Full-time versus part-time employment YoY% With job weakness set to intensify we still hold onto a 50bp cut view In terms of the Fed decision, today’s readings on balance suggest a 25bp cut looks marginally more likely than 50bp (50bp is our forecast), meaning there’s no real urgency to go hard early. Still, the jobs market is always the last thing to turn in a cycle, and it is already clearly cooling. Given Fed Chair Powell’s warning that “we don’t seek or welcome further cooling in labor market conditions” there is a strong argument for getting out ahead of potential weakness and opting for 50bp. He will certainly propose it but is likely to get some pushback from some regional presidents. I strongly suspect this won’t be a unanimous decision – something we haven’t seen for a long time. The next stop is CPI, which, of course, could completely blow this out of the water should we get an upside surprise of 0.3%MoM on core inflation… the job of an economist is never dull. Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user’s means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Original Post Continue reading →

cemagraphicsBy Jim Iuorio At a Glance The U.S. dollar’s strength this year is partly due to its performance relative to other devalued currencies The dollar weakened to recent lows as the market anticipates rate cuts in September Since early 2020, the U.S. dollar defied economic expectations by appreciating against most of the world’s currencies. This trend is perplexing given the unprecedented rise in both national debt and the M2 money supply in the United States during this period. This year, the U.S. national debt has surged to $35 trillion, marking a 50% increase since the start of 2020. Simultaneously, the M2 money supply has expanded by nearly 40%. These figures prompt a crucial question: has the dollar been genuinely strong, or has this perceived strength merely been an illusion? Defining U.S. Dollar Strength According to basic monetarist theory, significant increases in debt and money supply should weaken a currency. With more dollars in circulation, each dollar theoretically holds less value, particularly when the supply of goods remains unchanged – leading to inflation. And indeed, inflation did rise. The crux of the matter may lie in how we measure the dollar’s strength. In finance, currency strength is often gauged relative to other global currencies, a critical concept that impacts global trade and interest rate policies. In response to the economic fallout from the COVID-19 pandemic, most countries, including the U.S., adopted similar measures to stave off deflationary pressures: cutting interest rates and increasing deficit spending to bolster demand. Initially, the U.S. was particularly aggressive, reducing rates to near zero and enacting massive debt-fueled stimulus packages. As expected, the dollar depreciated by roughly 10% against major currencies, hitting a low around June 2021. However, the narrative shifted in June 2021 when inflation emerged, signaling that the Federal Reserve would soon begin raising rates. Each month of delay heightened expectations of just how high rates could go. Beginning in February 2022, the Fed embarked on one of the most aggressive rate-hiking cycles in history, raising the federal funds rate from zero to 5.37% in just 18 months. U.S. rates soon outpaced those in most of the developed world. Recent comments by Fed Chair Jerome Powell have indicated that rate cuts are now imminent, which will likely shift global currency markets yet again. Alongside the Fed rate-hiking cycle, FX volatility increased materially and CME Group FX futures quarterly average daily volumes reached record levels in Q3 2022, trading over one million contracts per day. While FX volatility has normalized in 2024, open interest in FX futures has continued to grow, reaching record levels of over 2.8 million contracts on June 14. Carry Trade in Currency Markets To understand how rate differentials affect currency values, consider the U.S. dollar versus the Japanese yen. After battling deflation for nearly 30 years, the Bank of Japan (BOJ) was more tolerant of inflation than the U.S. The BOJ kept rates in negative territory well into 2024, trying to finally overcome deflation. As a result, the yen plummeted, losing 28% of its value against the dollar before bottoming out in July 2024. This rate differential has significant implications for currencies due to a phenomenon known as the carry trade. Essentially, entities borrow large amounts of yen from Japanese banks at low rates, sell the yen to buy dollars, and invest those dollars in higher-yielding assets. Over time, this process pushes the low-rate currency further down and the high-rate currency higher. However, the risk arises when the trade becomes overcrowded, making the market vulnerable to a sudden “unwind” as positions are liquidated. The Euro’s weakness against the dollar followed a similar pattern, compounded by economic concerns over the impact of Russian sanctions on regional economies. Hedging Potential Dollar Fluctuations In mid-August, the dollar weakened to recent lows after Powell’s remarks. If a trader believes that the dollar’s improbable run of relative strength is truly nearing its end, they could use CME Group FX futures to manage the risk. July ADV in the FX suite of products increased by 9% compared to July 2023 as more market participants used futures to manage risk. If a trader anticipates a reversal of the carry trade and a surge in the yen to continue, they could buy CME Japanese yen futures. Conversely, if they expect continued economic challenges in Europe, they might sell CME euro futures. Those concerned with ongoing weak currency policies globally, and their implications for continued higher inflation, might also consider traditional inflation hedges like Gold futures or newer alternatives like Bitcoin futures. As the potential for rate cuts look likely in September, potential fluctuations in the dollar will likely remain in focus for many market participants. Original Post Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors. Continue reading →

Nuthawut SomsukBy Seema Shah, Chief Global Strategist Federal Reserve (Fed) Chair Jerome Powell has all but confirmed that the rate-cutting cycle will commence at the next FOMC meeting on September 18. Financial markets are currently pricing in 100 basis points (bps) of cuts this year-potentially equivalent to a 50bps cut in September and 25bps cuts in both November and December-as the Fed gears up to ward off recession. Its success in piloting a soft versus hard landing will play a key role in dictating the path for U.S. equities. Equity market reactions over previous Fed cycles Popular belief appears to be that, historically, equities have struggled once the Fed begins to reduce interest rates. However, a closer look at the 23 Fed cutting cycles since 1970 reveals a more nuanced picture:(1) On seven occasions, Fed action sparked a market recovery within one month of the first cut. On two occasions, markets were already rallying in the run-up to the first cut as they started to price in imminent Fed action. On 16 occasions, markets were higher six months after the first Fed cut. On nine of those occasions, market gains were in double digits. On average, the market bottomed three months later and was 5% lower, after the first Fed cut. However, solely looking at the average can be misleading. There has been a wide range of equity market reactions, with performance largely contingent on whether or not recession was avoided. S&P 500 performance preceding and following the first Fed cuts across all cutting cycles since 1970 Month 0 = beginning of rate cutting cycle, rebased to 100 at month 0 Source: Bloomberg, Federal Reserve, Principal Asset Management. Data as of September 4, 2024. In the 2001 and 2007 cutting cycles, spiking recession risk prompted the Fed to cut policy rates aggressively. Yet, despite the significant monetary easing, the U.S. economy could not avoid recession. In the 2007 cycle, 12 months after the first Fed cut, S&P 500 earnings per share were down 15%, and the market was down 24%. It took the S&P 500 around 17 months from the time of the first Fed rate cut to bottom, a few months before the U.S. economy exited recession. By contrast, the 1995 cutting cycle was fairly shallow, with just 75 basis points of easing. The U.S. economy was beginning to show signs of cooling, but the unemployment rate was relatively low. Inflation pressures were contained, permitting the Fed to reduce the restrictiveness of monetary policy. One year after the first policy rate cut, the Fed had successfully navigated a soft landing and the U.S. economy had continued to expand. The S&P 500 earnings per share had risen just 6%, but this was enough to fuel a 14% gain in the overall S&P 500 Index. The 1985 cutting cycle followed a similar path, with the U.S. economy avoiding recession and the S&P 500 delivering a 32% gain within 12 months of the first Fed cut. S&P 500 performance preceding and following the first Fed cuts in four select cutting cycles Month 0 = beginning of rate cutting cycle, rebased to 100 at month 0 Source: Bloomberg, Federal Reserve, Principal Asset Management. Data as of September 4, 2024. These historic experiences suggest that, in Fed easing cycles where the economy continues to soften, unemployment rises, and earnings growth struggles, the market tends to struggle. Yet, during easing cycles where recession has been avoided and, as a result, earnings growth remains fairly robust, equity markets generally react positively. The imminent Fed cycle So far, the S&P 500 has responded fairly positively to expectations for imminent Fed rate cuts, supported by a recent stream of solid economic data, raising hopes that Fed action will be sufficient to ward off recession. However, a weak August payrolls report (released on September 6) could damage investor sentiment, leading markets to believe that the Fed has been too slow to ease monetary policy and has made a policy error. Our analysis confirms that both economic activity and the labor market are undoubtedly slowing, and recession risk has increased. Yet, without any glaring household or corporate balance sheet vulnerabilities, Fed easing should be enough to prevent recession-there does not seem to be anything intrinsically broken that policy stimulus cannot fix. If recession is avoided, history suggests that equities can extend their recent rally. Since 1985, five of the best 10 years for the S&P 500 came when the Fed was cutting interest rates without recession. The historical perspective should provide investors some optimism for the future of the market. Footnote [1] Only Fed cycles which lasted a minimum of four months were included. Original Post Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors. Continue reading →

 When I think about the metals market, I chuckle as it has obliterated just about every expectation many have had about what drives the market.

We have seen metals decline during a strong inflationary period in 2022, wherein most were expecting them to rally alongside inflation. We have seen metals rally alongside the US Dollar when most were expecting it to move in the opposite direction to the dollar. And, we have seen rallies surprise many market participants due to a “lack of clear catalyst.”

Well, anyone who has followed my work through the years should not be surprised. I have attempted time and again to outline the many fallacies propagated throughout the metals market, while also outlining the most accurate manner in which you should track the metals. To this end, those who have followed along through the years recognize the accuracy of our work.

In fact, our analysis provided for advance warning of the gold top in 2011 within $6 of the actual high struck and outlined the downside target for the 2011-2015 correction even before we topped. Moreover, we then caught the low struck by gold at the end of 2015 as it was striking that low in the after-hours. 

In fact, in late 2015, as I was seeing signs that gold was bottoming, and outlined to my Elliottwavetrader subscribers that we may come up a bit shy of the $1,000 target. And, on December 30, 2015, I penned the following message to those willing to listen:

“As we move into 2016, I believe there is a greater than 80% probability that we finally see a long term bottom formed in the metals and miners and the long term bull market resumes. Those that followed our advice in 2011, and moved out of this market for the correction we expected, are now moving back into this market as we approach the long term bottom. In 2011, before gold even topped, we set our ideal target for this correction in the $700-$1,000 region in gold. We are now reaching our ideal target region, and the pattern we have developed over the last 4 years is just about complete. . . For those interested in my advice, I would highly suggest you start moving back into this market with your long term money . . .”

And, we have done this so many times over, that Doug Eberhardt, who is a metals dealer and a popular metals analyst at Seeking Alpha said this about us back in early 2016:

“I can attest to your accuracy on actually buying both gold and silver from us as close to the bottom as one could. With gold you called it to the letter and your limit order which was placed well in advance executed perfectly. The silver limit orders were within a tight range of the lows as well . . . Your timing on buying the dips is uncanny Avi! People should be aware of this.”

A few years later, as we caught the exact bottom in silver in 2020, Doug wrote the following in our trading room at Elliottwavetrader:

“Avi has the magic touch. Listen to him . . . And I want to explain to you all what Avi did for you. He got most of you to buy the metals before the premiums shot up and before everyone ran out of product. This is the 2nd time he has done this and kudos to him for doing that for you.”

For those who followed my work of late, you would know we caught the more recent pullback lows in silver and gold as well. Last year, I attempted to get readers focused on the metals, as I wrote several public articles on the metals during the last half of 2023 outlining my bullish expectations for the metals over the following year+. In fact, back in October 2023, this is what my GLD chart was projecting:

And, then in February 2024, this is what we were showing:

As you can see from these charts, we have hit our targets almost perfectly thus far. We have rallied to our target for Wave III, have consolidated in Wave IV, as expected over half a year ago, and we seem to be trying to build momentum for Wave V. In fact, Wave V may actually exceed the target we set almost a year ago. Again, this underscores the accuracy you can often achieve with our Elliott Wave Fibonacci Pinball methodology.

Moreover, we have done quite well in the mining stocks too. Back in September 2015, we identified the bottoming structure developing in the mining stocks. And, as an example, we were buying NEM (Newmont Mining – one of the largest mining companies) for around $15 a share. As the market developed, I set my long-term target for the 82-85 region. And, as we were approaching the 82 region in April of 2022, I outlined to our subscribers at Elliottwavetrader that I was selling my shares in NEM. As we now know, the top was struck that month at 86.37, with the price proceeding to drop precipitously and losing over 50% of its value within the next 7 months.  

More recently, you can see our analysis here on NEM as we expected a major low to be struck, followed by a strong rally, which I believe still has a lot higher to run. As of now, we have rallied over 80% off the February low. Moreover, I am targeting the upper end of my target box over the coming 18 months or so.

So, now, I am going to give you a heads-up on silver. Based upon the current set-up I am seeing in silver, support is now in the 28/29 region. As long as that holds as support, this set-up is projecting us to an ideal target between the 36.50-40 region in a very strong and relatively fast rally. This setup will trigger a strong move through 32.

As an aside, if silver is unable to bust through the 32 regions on the next rally, then it means that we will likely see one more corrective pullback before the strong rally to 36-40, and ultimately higher. As an alternative, should silver see a sustained break below 27.50, then it will make this pullback likely much deeper, and point down into the 24.35-26 region before that next rally takes hold.

Silver has significantly lagged during the gold rally. And, I cannot say that it is unusual to see the various metals charts at different degrees in their structures. If you may remember, silver topped in April of 2011, whereas gold continued to rally until it struck its top 5 months later in September. So, I think Silver is now going to make an attempt to catch up. And, when silver runs, boy does it run. In fact, a parabolic move such as the one seen in 2010-2011 is not out of the question. But, we are going to take this one step at a time. Continue reading →

(Reuters) – U.S. stock index futures were flat to marginally lower ahead of a series of economic data on Thursday as investors scoured for clues to determine the size of the Federal Reserve’s interest rate cut that is expected later this month.The S&P 500 and the tech-heavy Nasdaq closed lower for the second straight session on Wednesday after a drop in job openings in July and a Fed survey fanned worries of slowing economic activity.Traders’ bets for a 25-basis point reduction in interest rates at the U.S. central bank’s meeting later in September stand at 59%, according to the CME Group’s FedWatch Tool. Bets for a larger 50-bps cut rose to 41% from 34% a week earlier.September has been historically weak for U.S. equities, with the benchmark index down about 1.2% for the month on average since 1928.Worries that a cooling labor market could mean a looming recession have added to the sense of caution, with the benchmark S&P 500 down more than 2% so far this week and tech stocks falling nearly 5%.Late on Wednesday, San Francisco Fed President Mary Daly, a voting member this year, said the central bank needs to cut interest rates to keep the labor market healthy, but it is now down to incoming economic data to determine by how much.Focus will be on the ADP National Employment Report and weekly jobless claims, in the run-up to Friday’s crucial non-farm payrolls data from the Labor Department.Economists expect the ADP report, due at 8:30 a.m. ET, to show private payrolls rose by 145,000 jobs in August, compared with an increase of 122,000 in July.The Institute of Supply Management survey, due at 10 a.m. ET, is expected to show non-manufacturing activity in August stood at 51.1.At 05:32 a.m. ET, Dow E-minis were up 24 points, or 0.06%, S&P 500 E-minis were down 1 point, or 0.02%, and Nasdaq 100 E-minis were down 39 points, or 0.21%.Nvidia edged up in premarket trading, after falling more than 11% during the past two sessions. The AI chip firm said on Wednesday it did not receive a U.S. Justice Department subpoena.Tesla rose 2.3% after the electric-vehicle maker said it will launch the full self-driving advanced driver assistance software in the first quarter next year in Europe and China, pending regulatory approval.Other rate-sensitive growth stocks such as Meta, Alphabet and Apple were flat to marginally lower.C3.ai tumbled 18.8% after the AI software firm missed quarterly subscription revenue estimates as enterprises tightened spending amid economic uncertainties.Leading up to the U.S. presidential elections, Goldman Sachs analysts said Democratic presidential candidate Kamala Harris’ proposed corporate tax hike could lower earnings for companies on the S&P 500 index by about 5%, while Republican candidate Donald Trump’s proposed relief would boost earnings by about 4%.(Reporting by Johann M Cherian in Bengaluru; Editing by Shounak Dasgupta) Continue reading →

Gold demand in China has been strong this year, reflecting a broader movement of the yellow metal from the West to the East. But the Chinese aren’t just accumulating gold. They have also been hoarding silver in recent months.

The Shanghai Metals Exchange has reported a significant surge in silver volume with prices consistently higher than Western exchanges. The price premium in China compared to the West has been as high as 10 percent. This signals an extremely strong demand for silver in China.

Chinese silver imports have also surged, hitting a three-year high of 390 tons last December. In June and July this year, imports broke through the 400-ton level. A year ago, import levels were half that, averaging in the 200-ton range.

According to the Jerusalem Post, “This suggests that China may be deliberately driving up the price of silver to drain the West’s resources.

Last year, China held the second-largest silver reserves in the world, trailing only Peru. Chinese reserves were reported at 71,000 tons. Peru, a major silver producer had a silver stockpile of 98,000 tons. U.S. silver reserves were 23,000 tons, ranking seventh globally.

If the Chinese can push the silver price higher, it could have major implications for the West, the Post reported.

“If the price of silver continues to rise, it could increase production costs for a wide range of industries, from electronics to solar panels. This could lead to higher consumer prices and a further slowdown of economic growth as China out-produces the West in electronics and solar panels.”

Silver’s outstanding electrical conductivity and reflectivity make it a crucial input in the ever-growing tech and green energy sectors.

The rapid expansion of solar energy use is one of the key factors pushing silver demand higher. As the Silver Institute reported, “Higher than expected photovoltaic (PV) capacity additions and faster adoption of new-generation solar cells raised global electrical & electronics demand by a substantial 20 percent. At the same time, other green-related applications, including power grid construction and automotive electrification, also contributed to the gains.”

However, there is some indication the growth in Chinese solar panel production could go beyond market-driven demand. According to a recent Bloomberg report, the Chinese are producing solar panels at an excessive clip. There is some speculation that the Chinese are engaging in some low-level economic warfare hoping to put the squeeze on Western economies.

According to the Post, the country has produced so many solar panels, some Chinese citizens are using them as garden fences.

China supplies about 80 percent of the world’s photovoltaic panels.

U.S. officials have voiced concern about Chinese trade practices in the solar sector, signaling they may be concerned that the policy goes beyond economic competition. In a memo released last May, the Biden administration said, “The U.S. Trade Representative, the Department of Energy, and the Department of Commerce will closely monitor import patterns to ensure the U.S. market does not become oversaturated and will explore all available measures to take action against unfair practices.”

Growing industrial demand for silver globally could also put upward price pressure on the metal.

Industrial demand set a record of 654.4 million ounces in 2023 and is expected to hit new highs this year.

China isn’t the only Asian country with an increasing appetite for silver. Indian silver imports are set to double. Analysts cite increasing solar power production and demand from the electronics sector as the primary drivers.

Silver demand has outstripped production for three straight years and the Silver Institute projects another market deficit this year.

In 2023, the silver market charted a structural deficit of 184.3 million ounces. The projection is for an even larger supply shortfall this year in the neighborhood of 215 million ounces. This would be the second-largest silver market deficit ever recorded.

The Post report raises the specter of a silver squeeze.

“Analysts warn that the growing demand for silver, coupled with limited supply, could lead to a ‘silver squeeze’ similar to the silver squeeze of 1980. If investors begin to panic and rush to buy silver, the price could skyrocket, causing significant disruptions to the global economy.”

Silver seems to be underpriced for these market dynamics.

The gold-silver ratio is over 87:1, meaning that it takes 87 ounces of silver to buy an ounce of gold. To put that into perspective, the average in the modern era has been between 40:1 and 60:1.

In other words, from a historical perspective, silver is underpriced.

Historically, the ratio has always returned to the mean. And when it does, it does it with a vengeance. The ratio fell to 30:1 in 2011 and below 20:1 in 1979. Continue reading →

(Bloomberg) — Gold edged lower for a fourth day as investors took stock following a broad sell-off that rattled equity and commodity markets, with the weakness stoked by concerns about economic growth.Most Read from BloombergBullion was down 0.3% after posting a similar decline in the previous session as a gauge of the US dollar — a go-to asset at a time of market stress — rose for a fifth day.The ructions will spur additional interest in payrolls data due Friday. Any signs of labor-sector weakening are likely to support a more aggressive pivot to easing by the Federal Reserve, potentially aiding gold.Gold has rallied by more than a fifth this year, supported by growing optimism that the Fed will start cutting rates from this month. Lower borrowing costs typically benefit the metal, which doesn’t pay interest. Robust over-the-counter purchases and haven demand have also underpinned the advance.Spot gold fell to $2,484.77 at 8:37 a.m. in London, after peaking at a record $2,531.75 in August. The Bloomberg Dollar Spot Index dipped 0.2%. Silver, platinum and palladium declined.—With assistance from William Clowes.Most Read from Bloomberg Businessweek©2024 Bloomberg L.P. Continue reading →

mevans/E+ via Getty ImagesAs I write this, gold is trading just under $2,500 an ounce after surging past the psychologically important level for the first time ever in mid-August. For seasoned gold mining investors, this should be a moment of validation. After all, the yellow metal has long been seen as the ultimate hedge against economic uncertainty. And yet, despite the bull run, gold stocks—those companies that mine, process and sell the metal—are trading at historically low valuations relative to the market. U.S. Global Investors This apparent disconnect offers contrarian investors an extraordinary opportunity. Rising Yields and the Gold Selloff Explained But first, why is this happening? The primary culprit for this disparity, I believe, lies in the impact of interest rates and central banks’ gold-buying spree. The real, inflation-adjusted 10-year Treasury yield rose from a low of around -1.2% in August 2021 to nearly 2.5% in October 2023, and for many investors, particularly those in Western countries, rising yields are a signal to sell non-interest-bearing gold. That’s exactly what happened. From the end of 2020 to May 2024, exchange-traded funds (ETFs) backed by physical gold shed approximately 30 million ounces, over a quarter of their total holdings, as yield-seeking investors pared back their positions. U.S. Global Investors What some investors may have overlooked, I’m afraid, is the long-term potential of the very assets they were letting go of. Gold stocks, unlike the physical metal, offer not just a hedge but also a means of participating in the upside of gold prices. Put another way, when gold prices have gone up, gold stocks have historically tended to rise even more. Right now, I believe these stocks are offering an unprecedented combination of low valuations and high potential returns. A Contrarian Take on Gold Stocks As contrarians, we understand that the best time to invest is often when sentiment is at its lowest. And sentiment around gold equities is pretty low right now. But history tells us that this could be the perfect time to buy. As you may be able to tell in the chart above, we’re seeing a reversal of the gold ETF selloff. Since mid-May, investors have added about 2.3 million ounces of gold, according to Bloomberg data; holdings now stand at their highest level since February of this year. This could be just the beginning. If real interest fall substantially, the tide could turn in favor of gold and gold equities. $3,000 Gold by Mid-2025? Historically, gold’s biggest gains have occurred when the Federal Reserve cuts interest rates amid economic uncertainty. Although there’s no obvious crisis on the horizon, markets are pricing in a 25-basis point cut at each of the next two Fed meetings in September and November, with a larger cut expected in December. If the Fed follows through, we could see gold prices not only maintain their current levels but soar to new heights. UBS is calling for $2,700 gold by mid-2025; Citigroup, Goldman Sachs and Bank of America all see the metal hitting $3,000. Stock Market Trends After the First Fed Rate Cut That’s not to say you should dump all your equities in favor of gold, especially as the Fed is on the verge of easing. Charles Schwab recently showed what stocks did in the past when rates fell, and investors may want to take note. The stock market traded up 12 out of 14 times—or 86% of the time—a year after the Fed made its initial cut in a new easing cycle. Schwab points out that the two back-to-back negative periods were predicated on extraordinary circumstances: the dotcom bubble in 2001 and the housing crisis in 2007. Past performance is no guarantee of future results, but it’s worth considering. U.S. Global Investors This is excellent news for general investors, including the record number of “401(k) millionaires”—investors who have $1 million or more in their retirement accounts. According to Fidelity, there are now almost half a million such millionaires… and growing! U.S. Global Investors Continue reading →

PM ImagesOverview The sharp losses in global equities are dominating today’s market developments. Yesterday’s 2.1% loss of the S&P 500 and 3.25% drop in the Nasdaq were the largest since the carry-trade unwind climaxed on August 5. They have fallen more today and are poised to gap lower at the opening. Asia Pacific shares tumbled, led by Taiwan’s 4.5% (TWSE) tumble and the Nikkei’s (NKY:IND) 4.25% loss. It delivered Indian stocks its first loss in nearly three weeks. Europe’s Stoxx 600 (STOXX) is off 1.1%, its third day of losses and the most since August 5. The equity drop is giving bonds a haven bid, and benchmark 10-year yields are 2-3 bps lower in Europe. The 10-year Treasury yield (US10Y) is softer, a little below 3.82%. The lowest closing yield this year was slightly below 3.79% on August 5. Gold is heavy and looks as if sales may be able to meet margin calls. The yellow metal, which peaked last week near $2530, reached $2472 today. The 20-day moving average is around $2490, and it has not closed below it since August 7. With Libyan supply set to return and OPEC+ to allow increased output starting next month, while demand is seen weaker, October WTI plunged to almost $69 a barrel today. Recall that before the weekend, it had approached $77. October WTI recovered in Europe to re-enter yesterday’s range but looks to struggle in front of $71. For its part, the dollar is mixed today. The Canadian dollar and Scandis are still trading with heavier bias, while the others have steadied. The Japanese yen is the strongest, up about 0.2%. The Bank of Canada is widely expected to cut rates today and signal further cuts are likely. Most emerging market currencies have firmer, but the Turkish lira, Mexican peso, and Taiwanese dollar are nursing small losses. Asia Pacific Japanese markets do not seem sensitive to the PMI and the final August services and composite PMI were no exception to the general rule. Last week, the Japanese government upgraded its assessment of the economy for the first time in 15 months, and yesterday, BOJ Governor Ueda reaffirmed his commitment to raising rates further, barring a new economic surprise. The final composite PMI comes in a 52.9, down from the 53.0 flash reading but still the highest since May 2023. Australia’s final services and composite PMI were a little better than the initial estimates. The composite stands at 51.7, a three-month-high, up from the 51.4 flash estimate. Australia’s reported Q2 GDP expanded by 0.2%, as expected, after growth in Q1 was revised to 0.2% from 0.1%. Australia also reported July household spending. The 0.8% rise offset the 0.5% decline in June, and the year-over-year rate stands at 2.9%, up from 2.2%. China’s Caixin services and composite PMI elicited little market reaction. Its readings were stronger than the “official” version, but the market is terribly suspicious of Chinese data, and is convinced additional stimulative measures are needed if the ~5% growth target is to be met. The dollar traded on both sides of Monday’s range against the Japanese yen on Tuesday but settled within the range, imparting a more neutral tone. Recall that after falling to about JPY143.45 on August 26, the greenback recovered. It rose slightly above JPY147.15 on Monday and made a marginal new high yesterday before reversing lower to nearly JPY145.15 in early North American turnover. Soft US data and a sharp decline in stocks gave the US Treasury market a boost, which also helped sustain the yen’s bid. The dollar ground lower through the Asia Pacific session and recorded a low near JPY144.75. It found a bid in early European turnover. Nearby resistance is seen around JPY145.50. A break of JPY144.75 could spur a test on trendline support found today near JPY144.00. The Australian dollar found support slightly below $0.6710 yesterday but was sold to almost $0.6685 early in the local session today. It recovered to a new session high in early European turnover to almost $0.6720. Resistance may be in the $0.6730-40 area. A break of the $0.6680 could signal losses toward $0.6640 initially, and then the $0.6580-$0.6600 area. The New Zealand dollar is also breaking down. It was the best-performing G10 currency last month with a 5% gain against the US dollar and a 1.6% gain against the Australian dollar. It is the worst performer here at the start of September. It frayed support near $0.6170 today and the next technical target is around $0.6125-35 next, and possible $0.6100. Resistance is now around $0.6200. The US dollar continued to recover from the low set at the end of last week (~CNH7.0710), which had not been seen since June 2023. It reached CNH7.1310 yesterday, and with the help of a stronger yen, fell back to around CNH7.1060 today. Resistance is seen in the CNH7.14-CNH7.15 area. The PBOC set the dollar’s reference rate at CNY7.1148 (CNY7.1112 yesterday). Europe What new information to be gleaned from the final eurozone services and composite PMI comes from Italy and Spain, which do not have preliminary estimates. The takeaway is that they are doing better than Germany and France. Italy’s manufacturing PMI improved for the third consecutive month in August and has risen in seven of the last nine months, though it has not been above the 50 boom/bust level since March 2023. On the other hand, the services PMI slipped in August (51.4 vs. 51.7) for the fifth consecutive month but has not been below 50 this year. The composite rose for the first time since the end of Q1 (50.8 vs. 50.3). Turning to Spain, its manufacturing PMI fell for a third month in August to 50.5. It has not been lower since January. The service PMI rose for the first time in three months in August but at 54.6, it is slightly below this year’s average (~55.2). The composite edged up to 53.5 (53.4 in July) and was at 50.4 at the end of last year. In addition to next week’s ECB meeting, which is widely expected to announce the second cut in the cycle (and update economic forecasts), attention is gradually turning to next year’s budget. France needs a new prime minister and government to do so. Pressure is mounting on French President Macron. The UK’s final service and composite PMI underscore that momentum seen in H1 when it was the fastest growing the G7 is carrying into Q3. The services PMI was revised to 53.7 from the preliminary estimate of 53.3 and 52.5 in July. The composite PMI stands at 53.8, a four-month-high. (53.4 initially, and 52.8 in July). The Autumn Budget, Labour’s first, will be delivered at the end of October and both Prime Minister Starmer and Chancellor of the Exchequer Reeves warn that the unexpected GBP27 bln hole left by the previous government will likely require a tax increase. There is much talk of a capital gains tax increase. The euro peaked slightly above $1.12 on August 26 and reached $1.1025 yesterday. It settled yesterday below the 20-day moving average (~$1.1055) for the first time since August 1. It is consolidating inside yesterday’s range so far today. Support below yesterday’s lows is in the $1.0990-$1.1000 area, but given the state of the momentum indicators, and with the five-day moving average slipping below the 20-day moving average for the first time in a month, the downside risk may extend toward $1.0940. Resistance may be encountered near $1.1075. Sterling peaked near $1.3265 on August 27. It approached $1.31 before the weekend. It eased below it yesterday, but it is holding today. The momentum indicators have turned lower, and we suspect the downside correction is still in its early stages. Nearby resistance is seen around $1.3150. Options for almost GBP670 mln at $1.3075 expire tomorrow. A break of $1.3080 would suggest a test on the $1.2965-$1.3000 area. America Today’s US data are a likely minor distraction from Friday’s national employment report. And there is little new in today’s reports. The preliminary goods trade balance foretells a widening of the US July trade deficit. US retailers and wholesalers appear to be front-loading holiday shipments in fear of supply chain disruptions, and inventories are rising. A jump in the volatile factory orders time series can be anticipated after the 9.9% Boeing-order-induced jump in durable goods orders. The JOLTS report on job openings appears to have lost its sting, and in any event, it has been trending lower for more than two years. Still, it remains a little elevated compared with levels that prevailed before the pandemic. August auto sales will trickle in over the course of the session. Although they will impact retail sales and consumption forecasts, the market impact is often minimal. Still, auto sales are expected to have slowed to around a 15.4 mln seasonally adjusted annual rate, down from 15.82 mln in July. Through July, US auto sales have averaged slightly less than 15.6 mln compared with 15.4 mln in the first seven months of 2023. The Fed’s Beige Book will be released late in the session, but with high conviction that the Fed will cut 25 bps on September 18, the impact may be minor. Meanwhile, the Bank of Canada will most likely announce its third rate cut of the year shortly after reporting the July merchandise trade balance. In the first half, Canada recorded a C$1.45 bln goods deficit, which is down from C$4.14 bln in the H1 23. Canada runs a current account deficit of less than 1% of GDP. The Bank of Canada is nearly universally expected to cut rates today, (to 4.25%), and the swaps market is fully discounting quarter-point cuts at the next three meetings (through the Jan 29, 2025, meeting). Another 50 bps of cuts is discounted between March and July next year to bring the target rate to ~3%. The US dollar strengthened against the Canadian dollar yesterday for the fifth consecutive session. After bottoming last week near CAD1.3440, its lowest level since March, the greenback recovered to a little above CAD1.3560 yesterday. The greenback has not been below CAD1.3530 today, and it is pressing against yesterday’s high. Tuesday’s advance of almost 0.40% was the most in a month. We have been looking for the recovery to extend toward CAD1.3600, but that may be too conservative. The risk may extend toward CAD1.3635 and possibly CAD1.3700. The US dollar reached a new high against the Mexican peso yesterday since the August 5 peak (~MXN20.2180). It was turned back from slightly below MXN19.9850 and settled lower on the day (~MXN19.80). It is firm near MXN19.84 in late European morning turnover. Among the Latam currencies, the greenback finished lower only against the peso. The momentum indicators are getting stretched, but do not prevent a retest of the last month’s high. The Chilean peso was the regional laggard, dropping 1.15%, arguably weighed down by the 2.8% drop in copper, its fourth consecutive daily drop (off 5% in the run) ahead of the central bank rate cut. The central bank has been cutting rates since July 2023, when the policy rate had been at 11.25% for nine months. Yesterday’s 25 bp cut brings the policy rate to 5.50%. The central bank signaled more cuts are likely, and the swaps market looks for another 125 bps of cuts over the next year. Disclaimer Original Post Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors. Continue reading →

Last Friday, United States Federal Reserve Chair Jerome Powell said “the time has come” to begin lowering interest rates, a process that will likely begin at the Fed’s Sept. 17-18 meeting.Markets are widely anticipating a 25-basis-points cut, or even 50 points if the economy looks weak and needs a stronger monetary boost. More reductions could follow before year’s end.

If the Fed follows through, it will cause bond yields to weaken further, the dollar to weaken more and commodity prices to strengthen. When positive real interest rates, which favor bond investors, turn negative, it will especially affect gold and silver prices to the upside.

Spot gold set a record $2,531.60 an ounce last week on Powell’s dovish comments. The buying trend continued into Monday, with the yellow metal hitting $2,514.73, and $2,525.00 as of 17:00 PST, Tuesday.

Gold’s rally, which started in mid-February, is underpinned mostly by increased geopolitical risks, central bank buying and slowing ETF sales.

Silver has gained mostly due to buying in India, China and so-called “paper silver”. Investors in July showed a renewed interest in silver ETFs, which had $300 million in inflows following two months of outflows totaling $1 billion, according to BlackRock’s latest Global ETP Flows report, via ETF.com.

Last week the metal followed gold higher, breaking through $30/oz. So far this year it is up 28% compared to gold’s 23%.

Year to date spot silver. Source: Kitco

The general consensus is that precious metals will continue to thrive over a longer horizon. AOTH’s research into the silver market indicates the metal is due for an upward price correction.

 Undervalued silver

Silver and gold largely move together, as both offer similar macro- and currency-hedging properties. While gold has hit record highs this year, silver remains undervalued, says John Ciampaglia, CEO of Sprott Asset Management.

Ciampaglia said with gold now above $2,500, silver prices should trend higher. Silver usually rallies after gold.

“It’s mind-boggling to us that silver is still below $30. It is obviously way off its 2010 highs, and we would love to see it get back to the $50 level,” said Ciampaglia. “We think it has the ability to do that over time.”

Gold-silver ratio

One way to gauge the relative value of gold versus silver is to calculate the gold-silver ratio. Simply divide the spot gold price by the spot silver price.

Source: Goldprice.org

According to Sprott Money, a breakout is coming because silver cannot continue to be so undervalued compared to gold. Using a median gold-silver ratio of 80:1 (80 ounces of silver to buy one ounce of gold), a gold price of $2,300 implies a silver price of $28.75. If gold reaches $2,500, as it has, maintaining that same ration means $31.25 silver.

But the thing is, when silver breaks out later this year or next, it will receive the same rush of attention and speculator cash that gold is currently enjoying. As such, the price target will not simply be $29 or $31. Instead, the initial goal will be $35 or higher. That’s a greater than 50% move from here and one from which you could greatly profit if you get correctly positioned before it begins.According to Investopedia, during the 20th century the average gold-silver ratio was 47:1. In the 21st century, the ratio has ranged mainly between 50:1 and 70:1, breaking above that point in 2018 with a peak of 104.98:1 in 2020. The lowest level for the ratio was 35:1 in 2011.

Another way of saying this, is it currently takes 85 ounces of silver to buy one ounce of gold, compared to the 20-year average of 68 oz.

Remember, when precious metals rallied in 2020, on the back of lockdowns, interest rates slashed to zero, QE, and general market fear, silver’s gain was double that of gold. The price ran up 43% from January to December, 2020, compared to gold’s mere 20.8% rise. Earlier in the year, as gold punched above $2,000 an ounce, a 39% gain, silver rallied to nearly $30 an ounce, a 147% increase.

Meanwhile, the gold-silver ratio fell from over 100:1 to just over 64:1. It could easily happen again, especially with the Fed poised to drop rates.

Technical analysis

We can also turn to the technical analysts to determine where silver is at and where it might be heading.

Hubert Moolan notes that over the last 125 years, the silver chart has formed two remarkably similar patterns. The 49-year pattern from 1919 to 1968 is almost the same as the one that started circa 1980.

Although the patterns are similar in basic form (they are both cups) and time, there is a big difference when it comes to the magnitude of price movement. For example, the price movement from the bottom (1932) of the first pattern to the top (1951) after about 11 years (from the secondary bottom) was 3.18 fold, whereas the movement from the bottom (1992) of the second pattern to the top (2011) after about 10 years (from the secondary bottom) was 13.09 fold.

This proves there was already significant outperformance (about 4.12 (13.09/3.18) times) during the formation of the current pattern. If this outperformance continues (which it likely will), then we can expect massive silver rallies for the rest of this decade.

In May, commodities analysts at TD Securities reiterated their bullish outlook for silver as demand continues to outstrip supply (more on that below).

“The last time silver prices broke through $30/oz, it traded to $50/oz in less than ten weeks,” Daniel Ghali, senior commodity strategist at TD wrote.

The Canadian bank said that growing demand could wipe out silver’s above-ground stocks within one to two years.

Silver demand

Silver, like gold, is a precious metal that offers investors protection during times of economic and political uncertainty. 

However, much of silver’s value is derived from its industrial demand. It’s estimated around 60% of silver is utilized in industrial applications, like solar and electronics, leaving only 40% for investing.

The lustrous metal has a multitude of industrial applications. This includes solar power, the automotive industry, brazing and soldering, 5G, and printed and flexible electronics.

Schiff Gold reported in May that silver demand in three sectors is expected to double in the next decade: industrial applications, jewelry production and silverware fabrication.

A report by Oxford Economics commissioned by the Silver Institute found that demand for these sectors is forecast to increase by 42% between 2023 and 2033.

As the metal with the highest electrical and thermal conductivity, silver is ideally suited to solar panels. A Saxo Bank report stated that “potential substitute metals cannot match silver in terms of energy output per solar panel.”

About 100 million ounces of silver are consumed per year for this purpose alone.

In May, a report by the International Energy Agency said global investment in solar PV manufacturing more than doubled last year to around $80 billion. This accounts for roughly 40% of global investment in clean-energy technology manufacturing.

Much of the growth is coming from, no surprise, China. The IEA says China more than doubled its investment in solar PV manufacturing between 2022 and 2023.

This is only going to continue.

According to Sprott, demand for silver from the makers of solar panels, particularly those in China, is forecast to increase by almost 170% by 2030, to about 273 million ounces — one fifth of total silver demand.

Last year the country commissioned as much solar as the entire world did in 2022. The IEA expects China to maintain an 85-90% market share of global solar supply chains and to double its manufacturing capacity again by the end of this year.

Miners are hoping to capitalize on the increasing demand for silver. Coeur Mining recently completed an expansion of its Rochester mine in Nevada, which is set to become the largest source of US-mined silver.

Hochschild Mining is also looking to expand its silver operations, by securing permits for a silver project in Peru slated to start in 2027.

Increasing investor interest in silver is hiking the share prices of some of the major silver miners. Pan American Silver is up 27.5% year to date, Coeur Mining has nearly doubled from $3.20 to $6.09, and Hecla Mining has risen from $4.69 to $5.99, a gain of 27%.

The Global X Silver Miners ETF (SIL) so far this year is up 15.1%.

Source: Yahoo Finance

Top silver companies in 2023. Source: Visual Capitalist

The transition to an electrified economy doesn’t happen without copper and silver, which is why in my opinion they are among the most highly investable commodities now, and for the foreseeable future. The danger, for end users, and opportunity, for resource investors, of coming shortages for both metals, only strengthens my thesis.  

In a recent commentary, the Silver Institute said industrial demand rose 11% last year to a new record of 654.4Moz, smashing the old record set in 2022.

In fact demand exceeded supply for the third year in a row.

Higher-than-expected photovoltaic (PV) capacity additions and faster adoption of new-generation solar cells raised electrical & electronics demand by a substantial 20%, to 445.1Moz, the institute said:

This gain reflects silver’s essential and growing use in PV, which recorded a new high of 193.5 Moz last year, increasing by a massive 64 percent over 2022’s figure of 118.1 Moz. Underpinning these overall gains was the limited scale of thrifting and substitution, as silver remains irreplaceable in many applications.

Chinese silver industrial demand rose by a remarkable 44% to 261.2Moz, primarily due to growth for green applications, chiefly PV. Last year, China’s rapid expansion of PV production accounted for over 90% of global panel shipments. Industrial demand in the United States stood at 128.1Moz, essentially flat over 2022, while Japan’s industrial offtake was also basically unchanged at 98Moz.

FX Street quotes a research paper by the University of New South Wales that found “solar manufacturers will likely require over 20% of the current annual silver supply by 2027. By 2050, solar panel production will use approximately 85–98% of the current global silver reserves.”

Who’s buying all the silver? India, China and silver-backed ETFs.

India in February purchased a whack of silver bullion, with silver imports surging 260%. The country bought 2,295 tonnes compared to just 637t in January — a new monthly record.

Putting that into perspective, it’s about 70 million ounces, more silver than the US Mint produced in American Silver Eagle coins over the past three years combined.

ABC News quoted a Canaccord senior mining analyst saying that silver is a more obtainable precious metal for “mum and dad” investors than more expensive gold, especially during uncertain times.

“The Chinese consumer loves silver as well [and] that’s been another impact,” said Tim Hoff.

The role of silver in Chinese history — Richard Mills

Kitco reported on April 8 that silver appears to be benefiting from both investment and industrial demand. Many investors are choosing to ride silver in an ETF investment vehicle. Kitco quoted precious metals analysts at Heraeus saying,

“Silver is a higher beta commodity than gold, so if retail investors show more interest as ETF holdings rise then it could outperform gold,” they noted. “Additionally, and in contrast to the gold market, silver investors re-entered the market for ETFs, with 10.7 moz of inflows in the last fortnight, taking total silver ETF holdings 3% higher year-to-date at 724 moz.”

The analysts said that industrial demand for silver is also expected to rise this year, based on “recent strong manufacturing data from the US and China” in addition to burgeoning Chinese solar installations.

If the demand for silver in solar power doesn’t blow the doors off the silver price in the near future, it may be a change in battery technology that does it.

Kitco reported recently that Samsung has developed a new solid-state battery that includes silver as a key component.

The site quotes retired investment professional Kevin Bambrough saying:

“The key drivers that will ramp up demand for EVs are range, charge time, battery life and safety,” Bambrough said. “Samsung’s new solid-state battery technology, incorporating a silver-carbon (Ag-C) composite layer for the anode, exemplifies this advancement. Silver’s exceptional electrical conductivity and stability are leveraged to enhance battery performance and durability, achieving amazing benchmarks like a 600-mile range and a 20-year lifespan and 9-minute charge.”

Bambrough provided estimates showing there could be up to 5 grams of silver per cell in these batteries, meaning “a typical EV battery pack containing around 200 cells for a 100 kWh capacity could require about 1 kg of silver per vehicle.”

If his numbers are right, it could mean a major new demand driver for silver going forward. Even if 20% of electric vehicles were to adopt Samsung’s SS batteries, the annual demand for silver would be around 16,000 tonnes, against total current production of 25,000 tonnes.

Kitco cites a report that says Samsung is already working with big automakers to incorporate its SS battery technology into EV development, including an agreement with Toyota to begin mass production of SS batteries in 2027. Lexus vehicles are also scheduled to be among the first to adopt them.

(The challenge is the cost. It’s around 3-4 times more expensive to manufacture SS batteries compared to lithium-ion and lithium-iron-phosphate batteries — not exactly a route to making EV sticker prices lower for cash-strapped and skeptical car buyers — Rick)

Silver supply

On the supply side, global silver mine production fell by 1% to 830.5Moz in 2023. Output was constrained by a four-month suspension of operations at Newmont’s Penasquito mine in Mexico due to a strike; lower ore grades; and mine closures in Argentina, Australia and Russia.

However, the negative supply news is countered by more silver miners listing on the Australian stock exchange, and some mothballed silver assets that are being re-envisioned as new mine startups.

For example, ABC News reports Horizon Minerals has an idle deposit near Kalgoorlie, 600 km east of Perth. “[W]e’re certainly reviewing what we’re going to do with it… and we reckon the potential is good,” said non-executive chairman Ashok Parekh.

Andean Silver recently bought a mine in Chile and is working to bring the project out of care and maintenance this year.

The article goes on to say that Australia has the largest share of the world’s economic silver resources, mostly in Queensland, the Northern Territory and South Australia. Silver is part of the commodity mix for several mines across the country.

China’s silver squeeze

The Jerusalem Post recently reported on an altogether unsurprising trend: that China is hoarding silver and deliberately driving up the price to drain the West’s resources.

The Shanghai Metals Exchange has seen a major surge in silver trading volume, with prices about 10% higher than those on Western exchanges.

Why would China want to drive up silver? Because silver is an input in many manufacturing processes, from electronics to solar panels. Companies will naturally pass on the higher cost of raw materials to consumers, which could lead to “a further slowdown of economic growth as China out produces the West in electronics and solar panels.”

Bloomberg reports that China’s silver imports reached a three-year high of 390 tons in December and 340 tons in April, compared to the monthly five-year average of 310 tons. In June and July, net silver imports surpassed 400 tons.

China is also hoarding solar panels, likely preparing to oversaturate the US market.

“Reports have shown China has produced so many solar panels that some Chinese citizens have put them to use as garden fences. About 80% of all panels made in the world originate from China,” states the Jerusalem Post.

Meanwhile, as mentioned, India is buying silver importing significant quantities from the West in recent years. The country recently cut it import duty on silver, further increasing demand for it.

According to the Jerusalem Post, Analysts warn that the growing demand for silver, coupled with limited supply, could lead to a “silver squeeze” similar to the silver squeeze of 1980. If investors begin to panic and rush to buy silver, the price could skyrocket, causing significant disruptions to the global economy.

Silver deficit

The Silver Institute reported a 184.3 million-ounce deficit in 2023 on the back of robust industrial demand.

The Silver Institute expects demand to grow by 2% this year, led by an anticipated 20% gain in the PV market. Industrial fabrication should post another all-time high, rising by 9%. Demand for jewelry and silverware fabrication are predicted to rise by 4% and 7%, respectively.

Total silver supply should decrease by 1%, meaning 2024 should see another deficit, amounting to 215.3Moz, the second-largest in more than 20 years.

In fact it’s the fourth year in a row that the silver market is in a structural supply deficit.

The numbers can be misleading.

The deficit actually fell 30% last year but at 184.3 million ounces it’s still massive. Global supply has been broadly steady at around 1 billion ounces but last year industrial silver demand grew 11%, reaching a new record of 654.4 million ounces. Usage was mostly in the green economy sector.

Total silver demand was 1.195 million ounces compared to 1,010.7Moz of total supply, which included mine production of 830.5Moz (-1%) and recycling of 178.6Moz.

A few more interesting facts from the report and observations on the silver market, courtesy of Investing Haven:

Only 123 million oz was left for silver investors after accounting for non-investment demand. The reality is that the pool available for investors is a fraction of the total silver produced.

The industrial fabrication of silver is expected to continue growing, driven by the PV market and other industrial segments, contributing to a forecasted 2% increase in total silver demand for the upcoming year.

The forecasted global silver demand for 2024 is an impressive 1.2 billion ounces, potentially the second-highest level ever recorded. This growth is primarily driven by strong industrial demand.

The COMEX silver price setting persists. Many tend to call this the “silver price manipulation by commercials.” Amid such short to medium term-oriented price influences, there is a deepening physical shortage unfolding. The clock is ticking, and the silver market is at a crucial juncture. The Silver Institute’s bullish data adds weight to the argument that higher silver prices are not a matter of “if” but “when”.

The dynamics of price are completely distorted. It is clearly not supply/demand that is determining price, but something else. This “something else” is futures trading, because it is futures market positioning that is clearly determining price more than supply/demand dynamics. This is what many tend to call “silver price manipulation”, i.e. the dynamics of positioning between commercials and managed money traders. Sooner or later, the dynamics in the physical market, driven by a supply shortage that is getting out of hand, will ensure that the price of silver will reflect the supply shortage.

Conclusion

Silver is undervalued as reflected by the current gold-silver ratio which sits at 86:1. The 20-year average is 68:1. Even though silver has outperformed gold year to date, by 28% to 23%, it still has a lot more room to run.

A May note from Citigroup, via Bloomberg, says if the Federal Reserve proceeds with interest-rate cuts and economic growth stays strong in the second half, the ratio could move to around 70, implying a strong move up.

At Singapore-based dealer Silver Bullion Pte, more clients are buying physical silver and waiting to see what the ratio does.

Amongst the trading and the strategizing, we can’t forget simple supply and demand. Silver is in the fourth year of a shortage, with mined supply seemingly unable to keep up with demand, which is strongly influenced by the solar and electronics markets.

We’ve warned of a silver supply crunch coming, partially caused by China, which is hoarding the metal and driving up the price, in an effort to hurt Western manufacturers. As the price of gold tracks higher Indians are increasingly buying massive amounts of silver.

Bloomberg reported over the next two years, the LBMA stockpiles may be depleted given the current pace of demand, according to TD Securities.

“We are slowly going to see supplies tightening because industrial demand is set to go higher,” said Gregor Gregersen, founder of Silver Bullion Pte. “If investors are also starting to buy, then I think in two or three months’ time, my biggest problem might end up being ‘Where do I find supply?’ rather than ‘How do I sell the silver?’” Continue reading →