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A Perfect Storm Brewing: Silver Prices Won’t Stay This Low Lombardi Letter 2021-05-07 07:11:08 silver prices silver market A perfect storm is brewing in the silver market, and almost no one seems to be paying attention. The situation foretells soaring silver prices. If you're ignoring silver, you could be making a big mistake. Here’s why. Commodities,Silver https://www.lombardiletter.com/wp-content/uploads/2021/05/silver-bar-or-bullion-ingot-in-liquid-silver-metal-X9MP2WN-150x150.jpg

A Perfect Storm Brewing: Silver Prices Won’t Stay This Low

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This One Basic Factor Could Send Silver Prices Soaring

There’s a perfect storm brewing in the silver market. Silver prices look dirt cheap right now. If you’re ignoring the gray precious metal, you could be making a grave mistake.

It’s important to know about the supply and demand sides of the silver market. The demand side consists of industrial buyers and investors. The supply side consists of silver miners and some recyclers. At the moment, the supply and demand sides are completely distorted.

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Silver Demand Remains Robust

Looking at the demand side first…

We’re getting out of a massive crisis—the COVID-19 pandemic—and life is getting back to normal. With this, it’s expected that we’ll see a burst of production in the near term. It wouldn’t be shocking if industrial demand for silver becomes higher than normal in the coming months and quarters.

But remember, silver has investment demand as well. And currently, the investment demand for the gray precious metal is strong.

Consider this: in the first four months of 2021, the U.S. Mint sold 13.1 million ounces of silver in American Eagle coins. (Source: “Bullion Sales,” U.S. Mint, last accessed May 6, 2021.)

In the entire year of 2019, the mint sold 14.8 million ounces of silver in American Eagle coins. It doesn’t require rocket science here: after just a few months of 2021, silver sales at the U.S. Mint are nearing the entire sales for 2019.

In 2020, the U.S. Mint sold more than 30.0 million ounces of silver in American Eagle coins. In the first four months of that year, the mint had sold a little over 10 million ounces of silver in American Eagle coins.

To sum up the demand side of the silver market: it’s looking robust and it seems like things could get a lot better.

Supply-Side Woes Continue

If you look at the supply side, there isn’t really much silver being produced.

Over the past few years, miners have struggled, and just recently, silver prices came to where the miners have some “breathing space” (they can produce silver profitably). But they aren’t reporting immense production increases at the moment—at least nowhere close to how the demand-side figures look.

Many of the silver miners were struggling over the past few years. They didn’t spend money on exploration, either. This has created a lot of problems for future production.

Basic Economics Suggest Silver Prices Could Surge

Dear reader, I’ve remained bullish on silver for years. Now my convictions are getting stronger.

My reasoning is very simple: the demand side is very strong while the supply side struggles dearly. Over the past several years, the silver market has had deficits: the demand has been higher than the supply.

As I said earlier, there’s a perfect storm brewing in the silver market, and almost no one is paying attention to it. Basic economics are at play here: since demand is strong and supply is struggling, silver prices could go a lot higher.

There’s a lot of noise out there these days. Don’t get lured by investments that are making all-time highs. Pay attention to opportunities like silver. The metal is undervalued and overlooked, and the case for higher silver prices continues to get strong. Investors who are there early could make obscene returns.

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