Dec. 2, 2021
Silver is poised for a major breakout.
The white metal has already doubled from an interim low of $11.74 in March of last year to currently just above $22 per ounce.
And that may be just the beginning of a major upside move as we leave 2021 in the proverbial rearview.
Silver’s price performance, historically speaking, has always been somewhat tied to the price of gold — with a number of important distinctions.
First, in terms of their positive price correlation — at gold's current price level of $1,780 an ounce — silver’s historic relative value of 55:1 (The Gold/Silver Ratio) is pegged at $32.36 per ounce.
That means, at present, silver is historically undervalued relative to gold by about $10 per silver ounce. Such a rerating to the upside would equate to a nearly 45% rise in the price of silver and would undoubtedly drive related share values higher.
In terms of their key differences, the price of gold relies heavily on investor sentiment as a hedge against inflation. In today’s hyper-inflationary climate, that sentiment is beginning to shift in favor of the yellow metal, which should, in turn, bring silver prices along for the ride due to their positive price correlation.
Of course, a key difference is the way in which these two precious metals are used, with silver holding a distinct advantage over gold in terms of its industrial applications.
Most of the gold that is newly mined or recycled is used in the manufacture of jewelry — and nearly 98% of the gold that has ever been mined remains available for trade, barter, recycling, etc.
Conversely, silver has continually added to its traditional currency value by expanding its critical industrial applications, which include uses in:
- Solar panels
As just one example, the solar power industry alone has accounted for nearly 15% of silver’s industrial demand so far this year. And with more and more consumers shifting toward solar power, the result will be increased demand for the white metal going forward.
Additionally, about 36 million ounces of silver are used each year in the auto manufacturing sector, according to The Silver Institute. That level could rise even further with the global EV boom, which is forecast to put some 100 million electric vehicles on the world’s roads by 2030.
According to Benzinga.com, the combined total demand for silver is expected to exceed 1 billion ounces with about half coming from industrial demand, most notably from the renewable energy sector.
As of 2020, the total silver supply was roughly 975 million oz, of which 80% was mined. Hence, the supply/demand gap will be tight, and both miners and recyclers will be hard-pressed to produce enough silver to meet the projected shortfall.
In other words, silver offers the best of both worlds as a highly sought-after “precious” metal and as a high-demand “industrial” metal.
Throughout the years, I’ve had the distinct pleasure of meeting and interviewing “The Original Silver Bug” — Mr. James Dines of The Dines Letter.
He told me this last year…
As you know, Mike, silver has come all the way back down again. I think it's going to go up to $50 for a third time — but this time it's going to go right through it. Of course, nobody's going to believe it… they didn't believe me the first two times… but I'm looking for silver prices of at least $300 an ounce!
And keep in mind, Mr. Dines is regarded as one of the most successful precious metals investors of all time.
For speculators looking to cash in, there are a number of big players in the silver mining space that pay a quarterly dividend such as Pan American Silver, First Majestic Silver, Hecla Mining, and MAG Silver.
These “majors” could easily go up another 30%-50% from current price levels as silver inevitably breaks to the upside.
Yet, for the big-game hunters among us — it’s the “junior” explorers that offer the greatest potential reward where a single positive drill result can oftentimes produce an exponential rise in share value.
We have a number of pure-play junior silver explorers in the Resource Stock Digest stable that fit that model, including:
Be sure to check out the above links for more information, including exclusive interviews with upper management.
As silver breaks out… these juniors could really fly!
Yours in profits,
Editor, Resource Stock Digest