Silver Prices Have Dropped but Long Term Demand Make Silver Exploration Companies Attractive

silver prices
Published on: April 26, 2022
Author: Philip Tai

Silver has had a tumultuous start to Q2 and while prices have recently dropped due to the European conflict, the fundamentals for silver generally support the case for higher prices.  The long term macroeconomic trends paint a happier picture for the precious metal, however, with the silver market experiencing a deficit of 51.8 million ounces, according to the World Silver Survey, the biggest since 2010.  Investors should keep this in mind when looking for entry opportunities in stocks with sound long term fundamentals.

Why Did Silver Drop in April?

Silver prices fell amid the broader sell-off of commodities. The dollar rose against all major currencies ahead of expectations for Fed tightening. Benchmark yields declined sharply today after spiking at the end of last week amid concerns in China. Silver’s drop was linked to solid losses in the crude oil market and rising U.S. Treasury yields.

While hurting short-term silver bulls, the drop in prices may present entry opportunities for those interested in investing in silver exploration and mining stocks.

Demand Fundamentals Favor Silver

The fundamentals for silver, for the most part, support the case for higher long-term prices. Last year was great for silver demand, as reported by the Silver Institute’s recently released World Silver Survey 2022.

The Silver Institute reported, “The global silver market realized growth in every demand category in 2021, marking the first time all key sectors rose in tandem since 1997. Surpassing pre-pandemic volumes, total global silver demand achieved its highest level since 2015, surging 19 percent to 1.05 billion ounces…”

Bullion demand was also strong: “Physical silver investment (sales of silver coins and bars) leaped by 36 percent to 278.7 Moz, its highest level since 2015, as retail investors in North America and Europe, motivated by safe-haven and inflationary concerns, took advantage of periodically lower silver prices to purchase coins and bars.”

Supply, meanwhile, failed to keep up with demand. The silver market experienced a deficit of 51.8 million ounces, according to the World Silver Survey, the biggest since 2010.

For 2022, industrial demand for silver is expected to break records, driven mainly by growth in solar and other electrical applications.

Clean Tech and EV Sectors Fueling Demand

Silver’s use in solar panel technology increased 13 percent to 113.7 Moz as global solar installations grew, while electronic and electrical demand overall rose by 9 percent to 330 Moz. 

The rise of battery electric vehicles is also spurring long term silver demand.  The average vehicle silver usage is currently estimated at 15-28 grams (g) per internal combustion engine (ICE) light vehicle. Hybrid vehicles use approximately 18-34g per light vehicle, while BEVs are estimated to consume in the range of 25-50g of silver per vehicle.

Investors Should Pay Attention to Silver Exploration Companies 

Silver, as well as other precious metals, have had difficulties breaking through to the next level in their prices.  Conflict, inflation, interest rates and other factors have made the commodities markets extremely volatile and the rise of cryptocurrencies have made precious metals less sought after as hedges against macroeconomic risks.

Investors should pay attention to silver exploration companies as their stock prices move not only with silver prices, but with the company’s ability to build value in their mining properties by drilling for and identifying silver resources.  Given the long term macroeconomic outlook for silver, investors should keep an eye on companies like Golden Tag Resources (TSXV:GOG)(OTCQB: GTAGF).

Golden Tag Resources Ltd. is a Toronto based mineral resource exploration company. The Company holds a 100% interest, subject to a 2% NSR, in the San Diego Project, in Durango, Mexico. The San Diego property is among the largest undeveloped silver assets in Mexico and is located within the prolific Velardeña Mining District. Velardeña hosts several mines having produced silver, zinc, lead and gold for over 100 years.

Follow Golden Tag’s twitter page to get the most recent updates on the results of the exploration program!

Disclaimer: The company described in this article is a customer of NAI Interactive Ltd. This material is for informational purposes only and is not intended as a recommendation or offer or solicitation for the purchase or sale of any securities or financial instruments, or for transactions involving any financial instrument or trading strategy.

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