About 26,000 tons of silver is expected to be produced this year, according to estimates by Robin Bhar, a London-based analyst at Societe Generale SA. That would be the least since 2013, and means global physical demand will top supply for seventh straight year. It comes as industrial use, ranging from solar cells to computer touch screens and even medicine, is booming.
“Supply growth has started to slow, more than for any other precious metal,” said John LaForge, the head of real assets strategy at Wells Fargo Investment Institute.
Demand for silver comes from three very distinct uses. Consumers buy silver jewelry and tableware. Investors see silver, like gold, as a hedge buy in volatile times.
Industry, meanwhile, is the most significant user, gathering up about 55 percent of available silver yearly, compared with about 10 percent for gold. The metal’s high conductivity to electricity and heat, along with its sensitivity to light and anti-bacterial qualities, contributes to literally hundreds of products, skewing the supply-demand formula for precious metals.
Investor sentiment shift, supply shortage bolster silver outlook
The industrial-applications sector will likely boost demand for the metal in 2019, according to Bloomberg Intelligence’s analysts Eily Ong and Tobias Nystedt. They see silver with a 50 percent upside for demand by 2023, compared with 17 percent for copper and 11 percent for gold.
Other analysts see more of a balancing act ahead, with the relative strength of the global and U.S. economies playing a significant role.
“While we continue to see uncertainty over global growth persisting, boosting investment demand for precious metals, we remain unconvinced that this relative preference for silver will continue,” analysts at Goldman Sachs Group Inc., including Hui Shan, wrote in a report earlier this month. “With many more industrial uses, silver demand is also more susceptible to slowing global growth.”
This year, with miners avoiding new projects amid global economic uncertainty, the price could spike as high as $17.50 an ounce from about $15.87 now, according to a Bloomberg survey of 11 traders and analysts.
The preliminary South Korean trade data revealed an apparent collapse in South Korean exports in January. This 'canary in the coalmine' adds to an already growing list of indicators pointing at an elevated risk of an earnings recession in 2019.
In order to cap price at $15.80 over the past five days, The Banks have created nearly 11,000 new Comex silver contracts. That's 55,000,000 new digital ounces fed to The Specs. For an explanation of this process and how it controls price, see here:
There is a greater degree of capital misallocation today than there was on the eve of the great financial crisis and five times more than in 2000.
In Figure 10, we show the relationship between Global Liquidity and the term structure of World interest rates as depicted by the slope of the G4 government yield curve. Term premia again play a role here because tight liquidity conditions, by forcing investors into demanding more ‘safe’ assets, push up bond prices and simultaneously pull down their yields and term premia. Thus, the general ‘flatness’ of yield curves across the major economies again testifies to generally weak Global Liquidity conditions. It is simply not the case, as many suggest, that Central Bank QE lowers bond yields. Rather, because government bonds are ‘safe’ assets, ‘reverse QE’, in fact, causes lower yields, and QE raises bond yields. This follows because term premia widen as the extra liquidity persuades investors to take more risks, so shifting asset allocation from ‘safe’ bonds to risky equities.