My Gold News | 30 August 2023

Global Nuggets: Is there a ‘Silver Squeeze’?

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Some media commentators have written a lot recently about the scarcity of physical silver – stockpiles of silver running low as demand outstrips supply.

In 2018, I was privileged to visit one of the largest COMEX silver vaults in the US, where a substantial amount of US-government owned physical silver is stored. The building, in rural Connecticut, looked on the outside like any other US warehouse, with a standard corporate-style entrance, a reception desk, pot plant with non-descript picture above, and receptionist. Any casual visitor would not have known what was behind the façade. There was no access to the building from the reception – it was a ‘blind’ entrance - it was necessary to go to the rear of the building.

Once inside, 8 security guards with rifles and machine guns, followed us around, supported by others from strategic points high up in the warehouse, with guns trained on us the entire time.

Imagine a warehouse the size of a rugby pitch, with racking 10-metres high, stacked floor to ceiling with 30KG LBMA good delivery silver bars. The warehouse was packed full.

My understanding is that this was one of several COMEX silver vaults in the US.

The point of this story is that there was a substantial amount of physical silver held in vaults (in 2018). Quite how full the same vaults are in 2023 is questionable, as the market dynamics have shifted completely in 5 years.

Since 2018 we have seen –

  • A global pandemic
  • Supply chain chaos globally, effecting the feedstock of silver from mines 
  • A war in Ukraine affecting global stability - The collapse of several US banks and the shift towards CBDC’s -
  • Economic upheaval – high inflation and interest rates across Western economies
  • A massive demand for physical silver coins and bars globally
  • A deepening distrust of government and financial institutions and a move towards alternative money systems
  • A huge rise in industrial demand for silver 

Solar panels will take up over 50% of silver demand by 2026 EV batteries, circuit boards and tech all use silver

For now, it’s likely that demand will continue to outstrip supply, but this will no doubt re-balance in the future. Only 28% of silver comes from mining the pure metal; the remaining 72% comes from the processing of other metals such as copper and re-cycling.

As with all supply / demand economics, the price of the commodity will rise as supply tightens and demand increases. At MyGold we expect to see upward pressure on the future price of silver, which has been validated by several analysts recently.

According to 30 banks and precious metals dealers (link below), they have forecasted a weighted ‘end of 2023’ silver price per ounce of USD 30.91 (NZD 50.83), which compares to today’s rate of NZD 38.84/oz.

Our view is that it’s an interesting time to invest in silver – affordable, and with a wide number of uses, that will only increase over time. Silver has been undervalued for a long time, which is an advantage to investors in the white precious metal, as demand continues to outstrip global demand. The law of economics will only reflect this as we expect to see a squeeze on silver.  

 A few snippets:

Silver undervalued

Silver price forecast

Silver – demand outstrips supply

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