Watchful eyes are trained on the silver market. In this historical context, silver remains underpriced despite the impressive price recovery witnessed earlier this year. As industry analyst Jason Maharrey reminds us, just a month ago silver was above the $39 an ounce mark. He’s optimistic that they still have lots of significant upside potential. The increasing industrial appetite, combined with a decades-high market deficit, makes for a compelling narrative about silver’s future direction.
The global silver market has undergone a historic transformation this year, reporting a 148.9 million ounce deficit. This shortfall is largely attributed to strong industrial demand, exceeding new supply for the fourth year in a row. The ramifications of this trend may overturn investor expectations and market dynamics over the next few months.
Silver Demand Trends
During the first half of 2024, silver exchange-traded fund (ETF) inflows surged to a record-breaking 95 million ounces. In fact, this increase was larger than all the net inflows we’d seen so far in 2023 combined. This increase marks the largest one-month increase in silver ETF flows since the Reddit-inspired silver squeeze of early 2021. It’s wonderful to see a renewed interest among investors.
ETF inflows have increased by almost 7 times. Demand for physical silver in the U.S. over that same time frame has decreased by nearly 30 percent as a result. This juxtaposition highlights a somewhat contradictory environment as institutional investment flows into the space while retail interest seems to be fading. India witnessed a stunning 7 percent jump in physical silver investment. This means that geographical disparities in demand are probably playing a major role on the global silver market.
European buyers are coming back into the silver market. This resurgence of interest is seen as a contributing factor in some of the relative bullishness making up for the physical silver-related declines in the U.S. The tug-of-war created by these regional trends might be key to calming the market and pushing prices up.
Market Predictions and Insights
Maharrey is looking forward to the next market correction, which he predicts will benefit silver – as it has in the past. He reminds us that today’s gold-silver ratio is 88 to 1. This figure is well above the modern historical norm of 60 to 1. This disparity, therefore, opens the door to silver price appreciation as the market plays catch up.
Historically increases and decreases in the gold-silver ratio have foreshadowed big moves in both metals. In 2011, silver prices were up 308%. As a result, the ratio plummeted from more than 80 to 1 all the way down to a mere 30 to 1. Such patterns give rise to hopes that silver will soon undergo a similar breakout, especially as it nears the $40 threshold.
Maharrey connects the dots between today’s market landscape and the environment that existed before gold set its record highs in 2023. He contends that a similar situation is about to play out for silver, creating a compelling investing opportunity for those who see the potential.
Investor Behavior and Opportunities
Maharrey observes that more and more Americans are cashing out their profits instead of reinvesting in silver. This all is taking place even though there are really good indicators for the metal. This underinvestment represents a troubling problem, as it signals a squandered opportunity for large returns in a market sector ready to break out.
All the while, the global supply is tightening just as demand is rising and consumers are changing behaviors. Investors must reconsider their approaches to adjust to these persistent shifts. Taking all of the current market dynamics into account, silver may very well be on the verge of a major price breakout.