Silver gets its shine back

Gold has been the precious metal getting all the attention as investors piled into the safe haven asset on the economic fallout of the pandemic. Gold price broke all-time records in August, reaching $2,050/oz.

But silver has also had an outstanding year, with its gain almost double gold’s. The rise has come off the back of a weakening US dollar, plunging real rates and geopolitical tensions — all of which give investors motivation to seek haven in precious metals.

Colin Plume, founder and CEO of Los Angeles-based precious metals broker Noble Gold, said prior to the pandemic, he saw investors buying gold and silver at a 60/40 ratio, but now the buying is nearly 50/50.

“We’ve seen a pretty dramatic uptick in our business since the shutdown, well over a 30% increase since March,” Plume told MINING.COM.

Silver was down 0.4% Monday at $26.87 an ounce after hitting a high of $29.13 on August 10th.

“Silver rose all the way [from $13.92] to $29, which is a pretty meteoric, unprecedented run for a four to five month time table”

Colin Plume, CEO, Noble Gold

“When covid hit, silver was sitting in the $15 range, and had an immediate pull back because of the strength of the dollar happened, end of March, early April. It hit $13.92, and rose all the way to $29, which is a pretty meteoric, unprecedented run for a four to five month time table,” Plume said.

Plume believes as the economy rebounds there will be more room for silver price appreciation, especially as California this year began requiring all new construction to include solar panels – for which silver is a major component.

Other states are likely to follow suit as solar panels come down in price and usage becomes more widespread, Plume said, adding California tends to set the bar for US real estate law.

“For solar panels, in California, next year, any new real estate property that is built, commercial, residential, anything, has to have solar panels in 2021…and silver is a big component of that.”

Short supply

Plume said it is difficult to acquire silver currently because production was down due to the pandemic.

Among the mining activities affected by covid-19, silver production has been the biggest victim.

“I think all of this will drive the price of silver up, and the physical demand on the retail side,” Plume said. “The recycling of silver is still not where it needs to be, so that forces you to focus on getting more of it out of the ground, and I think it’s becoming more difficult to do that.”

“I think we are going to continue seeing that shortage on the industrial side, and I know on the retail side, things like royal Canadian and US mint coins were not available for many months because of covid.”

Silver is still well below its all-time high of $49.52 reached on April 1 2011,
but since then the increase in usage for the electronics industry has increased dramatically.

While much of the industry is ramping back up, some mines have had to close again as covid-19 cases surge. The Silver Institute now predicts a market deficit for the first time in five years.

The world has seen a 13% decline in mined production from Latin America this year, with global supply set to shrink 7.2%. That is based on 67 million fewer ounces coming out of the region, which would be enough silver to make about 100 million solar panels.

(With files from Bloomberg)