As with any commodity, silver prices depend heavily on supply and demand. Over half of global silver demand comes from industry. Silver is used in medical sterilizers, electronics, solar panels, common medications, media storage, deodorant, stained glass, 3D printing, laundry detergent, automotive manufacturing, and more.
In 2017, industrial silver demand grew for the first time since 2013 and that’s a trend that looks to continue in 2018. A strong U.S. dollar and consistently low silver prices are helping industrial demand. That’s something that should attract potential silver investors, given how cheap it is to buy silver right now.
Low silver prices are holding back miners.
Low silver prices that are largely the result of investors staying back from silver in a big way mean that silver miners face tight margins. They are dealing with rising costs and a precious metal that’s becoming harder to find underground. The result is silver miners are refraining from exploring new silver and expanding silver production. It will take years for silver miners to catch up once prices start to rise, meaning a serious supply crunch is on the horizon.
Why are silver prices still so low?
So far, 2018 has seen silver prices remain stifled and slowly declining, falling nearly 2% in Q2 and encouraging further increases in demand. The price suppression right now largely seems to come from investor disinterest. Silver does best when it’s seen as a safe-haven asset, behaving like gold’s little cousin. Silver straddles the line between an industrial commodity and a speculative investment commodity. It’s both useful and a store of value that can be used to hedge against inflation and market turbulence. But precious metals investors have preferred gold lately, helping keep silver prices down. Is this the new normal or will investors return to silver? Keep your eye on the live silver price as the market heads into new territory.
Investors will rethink silver in the next crisis
Safe-haven assets include commodities like silver and gold, as well as U.S. bonds and U.S. dollars. But when the U.S. dollar declines in value and confidence in the U.S.’s ability to repay its debt declines, investors want a commodity that is still an exchange of value, i.e., precious metals like gold and silver that have long served as the basis for currencies throughout human history. And as the Fed loosens up monetary policy and raises interest rates, debt bubbles become an issue, inflation heats up, bonds start returning negative real returns, and the U.S. dollar will take a hit.
In past crises, rising silver prices have outpaced rising gold prices, giving silver investors who bought at low prices better returns. This is one reason many precious metals investors buy silver and gold both. Gold is better at retaining value during quieter periods while silver is more volatile and rises faster than gold. Start looking for silver bullion at low prices from dealers like Silver Gold Bull, which have large stocks of silver coins and silver bars. Your portfolio can benefit from silver prices set to rise thanks to a growing silver shortage.