The Monthly: May 2024

02 May 2024 / Corporate research

Feature article:

Is silver the cheapest asset on the planet?

Executive summary

  • Silver is a precious metal, a monetary metal and an industrial metal with a surprisingly wide range of uses. It’s not that well understood by investors and tends to get overshadowed by gold – but, perhaps, not for much longer.
  • We think that the provocative title of this article is justified by silver’s attractive fundamentals. The “official figures” from the Silver Institute estimate that the silver market has been in deficit for the past five years, and the deficit is increasing.
  • Silver supply from mining is relatively inelastic, as new mines can take at least 10 years from discovery to commissioning. Identifiable above-ground stocks in London, the US and Shanghai, have been in sharp decline since 2020.
  • Photovoltaic demand for silver in solar panels exploded in 2023 and, in our opinion, is substantially underestimated in the official figures. Based on our analysis, the deficit for silver is bigger than the consensus believes.
  • We expect that a shortage of silver will emerge going forward. In the meantime, the gold/silver ratio stands, currently, at 85x, making silver look cheap in a historical context. During the past century, it has been highly volatile in a range of 15x-20x during the peaks in gold/silver bull markets to more than 100x for short periods.
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