Silver’s Secret Bull Market

Based on the world’s silver ETFs, and the mountain of forces that are piling up, silver is poised to go much higher. Since April, silver ETFs have added 31 million ounces of the metal.

Silver ore in mines is a dwindling asset. That’s why primary silver miners’ average yield has fallen from 13 ounces per ton in 2005 to 7.4 ounces per ton in 2016. That’s a 43% decline in just 12 years.

Silver is an industrial metal. Half of silver demand is for industry. It will be affected by China’s economic and industrial outlook, which are both improving. While silver demand dropped last year, it is now moving higher.

Global silver production keeps falling. In fact, silver production fell more than demand last year. That is probably why prices went up 9.3% last year.

The Silver Institute reported that global silver production peaked in 2015. It takes years to develop a new silver mine, and there aren’t a lot of new silver projects around.

So the recent demand trend looks clear: upward. When happens when silver demand goes higher? Well, when you put together rising demand and falling supply, you get a deficit.

Last year, the physical deficit was 52.2 million ounces; that was the third year of deficit in a row. Banking giant HSBC has forecast a 132 million-ounce deficit for 2017, more than double last year’s deficit.

Some say that the silver market is always in deficit lately, and the market never seems to care. That’s because the deficit can be made up by aboveground stockpiles, but stockpiles will only last so long.

Charts show that someone is betting on a silver price squeeze, and the difference may be photovoltaic demand. It climbed from 57.2 million ounces in 2015 to 76.6 million ounces in 2016, and the solar build-out is still ramping up.