World Still Needs Silver!

WORLD STILL NEEDS SILVER

Silver continues to keep bouncing off of $18. Don’t think it’s a coincidence – the market is sending you a clear message. Every time the amateur traders panic-sell their silver, there’s big institutional money coming in to buy it at a discount.

They understand what the sellers fail to recognize: Silver isn’t a luxury in modern society. From phones to TV screens, switches, printed circuit boards and other electronics parts, silver makes everyday technology possible in the 2020s.

This isn’t to suggest that gold should be dismissed; it’s an essential part of any diversified portfolio. Central banks are storing up physical gold bullion as global currencies rapidly lose their purchasing power, while big-money investors maintain an allocation in gold for protective purposes.

Yet, the biggest move could happen with silver, which has been to around $50 while gold holders are eyeing a more modest breakout of $2,000 before they target higher price points. The fact that silver is still in the low $20s shouldn’t be viewed as a cause for consternation, but as a gift from a commodities market that hasn’t priced in the supply-demand imbalance yet.

It’s hard to even count all of the reasons that silver is needed today – and jewelry and silverware is just one piece of the puzzle. Most people don’t realize that silver is an ideal element for soldering and brazing, to join metal pieces like pipes, faucets, ducts, and electrical wires.

Additionally, silver is commonly used in the bearings of jet and helicopter engines. Plus, silver has germ-fighting, antibacterial properties; health-care facilities are actually combating antibiotic-resistant “super-bugs” with silver-embedded supplies, including needles and surgical tools. Furthermore, due to silver’s bacteria-fighting properties, it’s frequently used in the filters of water purifiers.

And of course, we can’t forget about silver’s essential applications in the clean-energy revolution. Silver’s use in photovoltaic solar panels and in electric vehicles – and the expected growth of those industries – means that more silver will be needed even if the supply remains in a deficit.

Don’t get the wrong idea – silver is used in all types of cars, not just fully electric ones. Electrical connections in cars frequently use silver-coated contacts, and silver switches are used to start the engine, control electric seats, and open/close electric windows.

At the same time, the electric vehicle movement will only accelerate this trend toward more expensive silver. Estimates indicate that by 2030, electric vehicles will account for as much as 17% of global car sales, while hybrids will account for an additional 20%. Astoundingly, the auto industry will consume an estimated 70 million ounces of silver by 2030, up from 45 million ounces in 2017.

So, while gold is crucially important as an inflation hedge and all precious metals have tremendous upside potential, silver could give investors more “bang for their buck” – an ironic phrase since the “buck” is destined to lose value over the long term.

If you still aren’t convinced that silver is deeply undervalued, take a look at this chart. There’s an old saying among chart watchers: The jaws always close sooner or later. Look at how wide the alligator’s jaws are right now – the divergence between the silver price and commodities in general is unusually wide, but just starting to close now.

Thus, commodities (minus oil and natural gas) are undervalued as a whole, and silver is undervalued among commodities. We’ve seen what silver is capable of; just look at 2011’s price action if you need a refresher on how fast and far silver can move, even without the benefit of “sticky” inflation.

Today, you have persistent dollar inflation and the other shoe is ready to drop at any given moment. When the dollar inevitably normalizes and the supply-demand imbalance worsens, silver has nowhere to go but up. At the end of the day, silver is just too useful for nations to do without it, and too attractively priced for sensible investors to ignore it.