Silver Market Shows Signs Of Potential Price Surge

(January 3, 2024 - BNN Correspondents)

In a recent development that has sent ripples through the global financial markets, the lease rates for silver have experienced spikes reminiscent of those seen before historic price surges. These lease rates, essentially the premiums charged for borrowing silver, have reached peaks unseen since the significant market bottom in 2008. This dramatic shift in the silver market landscape has led to an inversion of the lease rate yield curve, where short-term rates have begun to eclipse longer-term rates. This inversion strongly indicates a physical shortage of silver among banks and institutions.

Less Than $100 Billion Worth of Silver

The current global value of above-ground silver stocks is estimated to be less than $100 billion. To put this into perspective, the value of these stocks is dwarfed by the valuation of major tech companies and the U.S. equity market at large. The implication here is that even a minor shift of capital from equities to silver could trigger a substantial rise in the price of silver.

Mirror Image of Past Patterns

This situation bears a striking resemblance to the patterns observed in 2016, 2019, and 2022. These were periods that were followed by significant price increases for silver. In light of this, various silver bullion ETFs have been recommended for investment, with favorites including SLV, SIVR, PSLV, and AGQ. The latter offers 2x leverage but comes with additional risks.

The Green Energy Factor

Adding to the potential for a surge in silver prices is the growing demand for silver in green energy sectors, particularly in the production of solar panels. This burgeoning demand is expected to lend support to the market and could potentially lead to deficits in supply.

Historically, silver has been underpriced relative to U.S. money supply growth and national debt. This suggests that in the long-term, the value of silver should be much higher. Given the recent spike in lease rates and the patterns observed in the past, market experts anticipate another price advance for silver. It is predicted to reach or even surpass $30 per ounce in the near term, with even higher prices possible under certain economic or geopolitical circumstances.

Considering the potential for the Federal Reserve to respond to economic downturns with increased monetary expansion, silver bullion and related ETFs are rated as Strong Buy for long-term holders.