Last November 14, silver slipped below $14 per ounce to close at $13.97 in London. During intra-day trading silver reached a low of $13.82. Now, with silver prices over a dollar above those November lows, we could be at the beginning of another major bull market in silver over the next 3-5 years. The last century has seen three dramatic surges and retreats in the price of silver. This could be the start of the fourth cycle.
- First, silver rose from $0.50 to $1.34 during and just after World War I, followed by a collapse to $0.25 in 1932, in the depths of the Great Depression.
- Then came a long 200-fold price increase from $0.25 to $50 in the next 48 years, from 1932 to 1980, followed by a 21-year 92% price decrease.
- Finally, we saw a 12-fold increase from $4.06 to $48.70 in the 10 years from 2001 to 2011, followed by a 72% price drop from 2011 to 2015.
Using month-ending prices, silver rose 11% from the end of November 2018 to the end of February 2019 (vs. 7.75% for gold). In part, that’s because silver has more industrial uses than gold. Along with gold, silver has profited from its role as a crisis hedge and monetary metal, but silver also has an industrial side, which is not true for gold. Silver’s high conductivity to electricity and heat makes it valuable in countless industrial usages. Silver is used in making solar cells, computer touch screens and medicine, as well as in jewelry and tableware.
On the supply side, silver is usually only mined as a byproduct of a search for other metals. Due to the low prices of those metals, mining exploration is down this year. The expected new supply this year is 26,000 tons, the lowest new supply totals since 2013, according to estimates by Societe Generale SA.
Silver tends to go up faster than gold in rising markets, but it also tends to decline faster during bear markets. Part of that is due to silver’s smaller market. Silver is gold’s “little brother” in terms of lower trading volume based on the lower total value of each metal’s annual new supplies.
Specifically, about 950 million new ounces of silver are added to global supply from mining each year. At $15 per ounce, that’s a $14 billion market. By comparison, gold adds about 120 million ounces a year – just one-eighth of the weight of new silver supplies, but since gold is valued at around $1,300 per ounce, gold’s market size is $156 billion per year, about 10 times the size of the silver market. This helps silver leverage the gains or losses in gold, and this is why silver often looks like it trades like “gold on steroids.”
According to a recent Bloomberg survey of 11 silver traders and analysts, silver could rise to $17.50 an ounce later this year. Bloomberg Intelligence’s analysts Eily Ong and Tobias Nystedt also predict a 50% growth in silver demand by 2023.
Silver was up 11% from November 30 to February 28 – about 10 times the gains in stocks.
Investment November 30, 2018 February 28, 2019 3-Month Gains
SILVER $14.235 $15.815 +11.1%
GOLD $1,217.55 $1,319.95 +7.75%
Dow Jones 25,538 25,916 +1.48%
S&P 500 2,760.17 2,784.5 +0.88%
There is also high and rising demand from new buyers for silver as an investment metal, lower-priced and therefore more affordable than gold. Demand for the one ounce American Silver Eagle coins reached 4,017,500 ounces in January 2019, up 24.2% from January 2018. The January total of silver coin sales was the highest of any single month since January 2017.
The figures for February were just released and we see signs of continued strong demand for silver – despite the fact that the Mint ran out of American Silver Eagles on February 21. American Silver Eagle coins reached 2,157,500 ounces sold in 21 days in February, which is 128.9% above the 942,500 ounces sold in February of 2018, although the Mint sold the 2019 supply in three weeks vs. all four weeks in 2018.
Putting both months together, American Silver Eagle sales so far in 2019 were 6,175,000 ounces, or 47.8% above the 4,177,500 American Silver Eagle coins sold during the same time frame in 2018.