Three Unstoppable Forces Set to Drive Silver Prices
The comments below are an edited and abridged synopsis of an article by Stefan Gleason
The threat of economically crippling lockdowns, the promise of unending monetary stimulus, and the uncertainty of game-changing political outcomes—this is the new normal for investors.
In such an environment, all conventional asset classes carry more risk. Certain types of assets, though, may be well positioned to shine. Among them is silver.
With politicians and central bankers trying to paper over real economic losses with artificial stimulus, the outlook for the value of the US dollar is bleak.
A record $3.1 trillion federal budget deficit combined with a new inflation-raising campaign by the Fed puts holders of dollar-denominated paper assets in jeopardy.
Hard assets in general and precious metals in particular act as a natural countermeasure to currency depreciation.
Gleason discusses growth the electric vehicle market and solar energy installations that will require massive amounts of silver; environmental, social and governance (ESG) targets that include solar-related stocks, which could run into a serious supply problem in metals including silver; and investment demand for silver bullion, which has been surging while mining supply is contracting due to adverse economic and political (lockdown) conditions.
Silver often trades in a volatile manner; that could be amplified depending on how the election turns out and how much of a toll the virus takes in the coming weeks.
Regardless of whether the market reads a particular development as good or bad, three major long-term drivers of silver price appreciation appear unstoppable: the Fed will continue to pursue inflationary stimulus regardless of the election outcome; insatiable demand for solar energy and various electronic applications will use up more silver; and a silver mining supply deficit will contribute to market tightness and possible bottlenecks that render refined silver products difficult to obtain by investors and industrial users alike.
At some point, higher silver prices will send market signals that alleviate the supply-and-demand crunch. But that point may be years away—and multiples of price appreciation ahead.