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Creating lasting wealth by developing gold and silver properties with near-term mining potential
Against the backdrop of rising gold and strong copper prices, the spot silver price has risen by 18% so far this year, reaching $29.79 per ounce, the highest level in over three years. Silver is used in jewelry, electronics, electric vehicles, solar panels, and investments, facing a structural market supply gap this year.
The Silver Institute stated on Wednesday (April 17th local time) that due to strong industrial consumption driving a 2% growth in silver demand while total silver supply decreased by 1%, it is expected that the global silver supply gap will increase by 17% to reach 215.3 million troy ounces by 2024.
Philip Newman, Managing Director of consulting firm Metals Focus, mentioned that the supply gap in the silver market helps to provide strong support and a solid floor for silver prices. While last year’s supply gap decreased by 30%, the absolute value of 184.3 million ounces is still significant. Global supply remains relatively stable at around 1 billion ounces, while industrial demand has incredibly surged by 11%. Visible silver inventories and those held in exchange warehouses are still quite substantial. However, some silver may be tightly held, hence the ongoing impact of the supply gap in the future is expected to be interesting.
The report notes that silver inventories held by commodity exchange depositories and the London vaults decreased by 5% last year. By the end of 2023, the inventories were equivalent to nearly 15 months of global supply.
Most of the inventory decline occurred in China, which traditionally has been an oversupplied market as it produces silver from imported base metal concentrates. However, a sharp increase in local industrial demand (44%) is changing the local supply-demand and inventory dynamics.
A previous UBS research report highlighted that as many investors were caught off guard by the speed and extent of the gold price increase, silver offered an opportunity to catch up. While the silver supply-demand fundamentals are indeed tight, they are not sufficient to support a skyrocketing silver price. However, with the surge in gold prices, silver is naturally gaining favor among investors as a cheaper and more volatile alternative to gold.
