Silver

That's it, that's the story. Okay, so what am I going off about here? Let's chat...

As any of you who have read my rantings for any length of time knows, I still have a masochistic love for gold and silver. I say that jokingly, since in reality, both have done pretty darned well if your time horizon is long enough.

When we first started pushing the idea for gold, back in the early 2000's it was under 300 bucks an ounce. So seeing it 20 years later at 1800, isn't a bad return. I was later to the silver party, getting involved there in the 07-09 area. But there too, we've done pretty well.

Many of you longer term readers will remember the two "Vegas plays" we did. By using a ladder of silver miners, the first play took 30 grand to 1.2 million. The second one several years later took 19 grand to 246 thousand. They were nice and boy I'd sure love to see the silver situation allow for a repeat of those good times.

I am not at all suggesting we're ready to whip up another Vegas play here, not yet. But I do think the building blocks are being assembled as we speak. I want you to consider a few things.

First off, silver has indeed done fairly well over the past several months. It was trading in the 18's in September and has recently flirted with 24. So it's been fairly perky. But it isn't the price that's got me the most interested, no it's the demand. We'll get back to that in a minute....

Gold has also done well lately. In October gold was trading in the 1600's and has recently flirted with 1900. Now, gold is the one that always gets the catchy headlines. When it was reported that China had bought up a whopping 30 tonnes of the stuff in December, after buying 32 tonnes of it in November, it made headlines from Bloomberg to Forbes.

Why are they buying it? What's China's angle? Is China trying to make its yuan convertible to gold, etc etc. The articles were fast and furious.

Well, yeah, I think they are. As they move more and more away from the US dollar (such as buying Saudi oil in yuan's) they need a way to assure nations that their currency is valuable. What better way to insure your currency, than to "back it" with Gold? So, with war raging in Europe, with relations between the US and China on shaky ground, more and more people are indeed buying gold as some form of safety blanket. I get it, it's the same reason we ( you and I ) buy it.

My point is that the reason for Gold moving up, is because big players are buying it, and it's more apparent to people. If they see a central bank buying it, they can say "wow, look at that!" In fact, Reuters had this to say : Among large buyers were the central banks of Turkey, Uzbekistan, Qatar and India, but the WGC said a substantial amount of gold was also bought by central banks that did not publicly report their purchases.

But you'll never see a headline that says "The Central bank of England has bought 70 tonnes of silver bullion." That's simply not going to happen. For Central banks, it's gold only.

But silver of course is an interesting metal in that it is still used as both a "money" and an industrial metal. Don't forget that even here in the US, silver was until 1965, in all our coins except pennies.

But the big demand for silver, doesn't come as a money any longer. It's all about its properties as a unique metal. It is used in everything from aerospace to medicine, from solar panels to Iphones. The stuff is everywhere.

Yet you read no headlines about it. It doesn't get the spotlight like its big brother Gold. However, one should indeed pay attention to it, because as you'll see in a minute, "someone's buying it." Indeed.

During 2022, London LBMA vaults saw an unprecedented net outflow of 10000 tonnes of silver. With at least 18000 tonnes of remaining inventory owned by ETFs, a continuation of 2022's net outflow volume during 2023 is not possible without causing serious silver availability issues. 

Where'd all that silver go? Well that's a good question. Did you know that last year, especially around March, our own US mint had so much trouble sourcing silver that they stopped production of silver coins for a while? Indeed they did, and this is from Numismatic News last March: "Last week, the U.S. Mint announced that it would not strike 2022-dated Morgan and Peace silver dollars as it was experiencing difficulty in coming up with an adequate supply of the silver planchets.

This month, the wholesale and retail prices of the bullion issue U.S. silver Eagle dollars have also increased relative to the commodity market silver spot prices. Again, the U.S. Mint is being blamed for not providing as many coins “in qualities and quantities that the Secretary determines are sufficient to meet public demand” (text from 31 U.S. Code § 5112(e))."

So it's evident that for almost a year now, silver has been getting bought up. While it's pretty hard to figure out just how much impact the "retail" silver stacker truly has on things, one thing we can be sure of is that manufacturing is desperate for the stuff. Why? The new green deal.

An article out of PV magazine had this to say about silver in the drive for renewable energy: Based on expected PV growth, in line with climate change commitments, solar manufacturers would require at least 85% of global silver reserves, according to the new study.

Solar cells use silver to conduct the electric charge out of the cell and into the system. Each cell produced today requires just a few milligrams of the precious metal, but this quickly adds up and plenty of recent studies have illustrated how the rapidly growing solar industry could exhaust much of the world’s known silver reserves by 2050 or even earlier.

Even before the alarm began to be raised about availability of silver, cell makers were keen to cut their consumption of it anyway, as one of the most costly materials used in solar manufacturing. New research from Australia’s UNSW, however, shows that silver reduction efforts need to ramp up significantly to avoid a supply problem, particularly with the introduction of new n-type technologies that require more silver than the PERC cells that still represent more than 80% of the market today.

So, from up here in the cheap seats, it appears to me that silver is in higher demand and less supply than people are aware of. The LBMA itself says that if demand stays like it did in 2022 there's not enough supply left for 23. The solar panel makers are looking at huge increases in panel production and they need gobs more silver to make it happen. Add in the mom and pops around the world that are seeing a world that's more unstable than they've ever seen, with bioweapons, poison vaccines, war raging, tensions flaring, economic hardships, etc... and they're buying silver as insurance.

My point here is that I think 2023 "could" be a kick off year like we had back in 2010-2012 and in 2016. If things really start to align, then maybe we can put together another Vegas play with the miners. But besides just playing in stock and option land, I suggest that you buy as much physical silver as you seem fit to do.

I write articles. Therefore it is hard to try and fool anyone, since they can look back and say "hey, you said this in April of 2014" for example. Well, what have I said about silver since 2007? I've said that it would take time, but eventually I see silver at 70 - 100 dollars the ounce. I still believe that, and what I see right now, suggests to me that this year a powerful move could be in the making. Am I saying we see 70 this year? No. Do I think we could see 35+? Yes. Consider it.