I attended the Silver Institute dinner in November in New York City. The market at that time was, I would say, off from the excitement of the rest of the year. The weight of the higher interest rates, a slowdown in the global economy, and collapse of the commercial real estate market were acknowledged as ominous negative factors for the industry.
The presentation was given, and all the reasons supporting the silver market came to the forefront. The electrification of the world for the visual effect of a lesser carbon consuming economy is driving increased demand from the industrial sectors. Electric vehicles, solar panels and overall computerization of all things as the basic drivers in growth.
While growth in demand is good, a concern in any industry is always supply. Global mined production has continued to fall and is expected to continue the trend with a drop of 2% in 2023. According to the report by Metals Focus this year will be third in a row to have a deficit in supply with a shortfall of 140 million ounces. Their theses concludes that we will be seeing continued deficits into the foreseeable future.
At that time the silver to gold ratio was at about 88.3 and silver traded as low as $ 21.88 per ounce. I am not saying it is because of the report but since then silver seems to have taken one trajectory and that is higher. Since it was so undervalued basis the gold price as gold rallied on the back of international political concern and the overall disastrous state of the economies it has climbed as high as 25.71 with the ratio to gold coming down to around 83. This morning we are seeing a bit of retracement and are now down to $24.50 an ounce, a quite formidable climb to say the least. A step back is always a good thing though it may be nerve racking. it typically helps consolidation and the next push to the upside.
The rise though is not purely fundamental as what I have written may make you believe. Yes, fundamentals are important but there is one other major factor that is driving the price. That is the concern for the ongoing deterioration of the value of the US Dollar.
There are those that laugh at any deterioration of the US and its currency as purely fictional. This is the same sentiment that existed in relation to the British Empire less than a 100 years ago. There is an endeavor, though mocked, by other governments around the world to diverge from the use of the US dollar. The globalists don’t want to see this happen as they will diminish their power over the population. Barring outlawing of the ownership of gold and silver again the tide seems to be turning against their machinations.
There is definitely a large section of the population that is tired of being robbed by their governments through the invisible tax of inflation. This has spurred new and continued diversification away from US dollar-based assets to hard assets that are both in demand and liquid. This explains the continued growth of Bitcoin, gold and silver demand across the globe. I am not saying the diversification is limited to these markets, but these sure make life easier for those looking to protect their private wealth.
There is one constant in this world and that is change. It is coming, at what pace is the concern. But if recent history has anything to teach us, it is that destruction comes faster and easier than growth. A look at the State of California, once the poster child of the USA, proves that point.