Investing Professor
by on September 8, 2022  in Investing / Precious Metals /
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By Jeff Clark, Senior Analyst, Hard Assets Alliance

 

 

2022 was supposed to be a BIG year for silver.  


After all, many analysts projected silver would be at much higher prices by now, and yours truly predicted the next silver spike would occur when inflation spiked (meanwhile it’s doing the exact opposite).

So, every investor who owns silver, every mining company looking for or producing the metal, every person wondering if they should continue buying bullion is asking wondering:

Is it really going to happen for silver?

It’s a fair question, especially in light of the price falling below $18 and to 2-year lows. Almost any reasonable person would expect it to rise in this environment.

Are we wrong about silver? Should we give up on it?

Here are 3 things I told the audience at the Silver Symposium last week…

#1: Silver’s DNA is Boring, Boring, BOOM

If you study silver’s price behavior over the past 50+ years, a clear pattern emerges.

• Silver has long periods of dormant price behavior, punctuated by sudden and frequently explosive spikes.

This pattern is so common that it took me 11 slides to show them individually—and that wasn’t even all of them. (We’ll post the video when it’s available.) 


And in many cases throughout history, the price remained stubbornly weak in the face of what many assumed were major catalysts. I’m sure investors were asking…

• Why wasn’t silver rising in the mid-1970s when inflation was soaring?

• Why it was weak in the mid-1990s when the economy boomed and industrial demand for silver rose?
• Why it fell in 2001, after 9/11?

And yet in every instance in history, the price was coiling and sooner or later led to another spike. In some cases, a life-changing one. 


Something else was evident: the time between these spikes is measured in years.

Time Between Silver Spikes

You’ll see the average is 3 years and 7 months. However, if you remove the 2 bear markets (1980-1986 and 1987-1993), the average is 2 years and 7 months. 


The last silver spike ended almost exactly 2 years ago. Based strictly on historical averages, 2023 could be a very interesting year for silver.

This research shows that while we don’t like silver’s price action, while it isn’t acting like we all thought it would, while it is indeed puzzling and maddening, the current price action does not fall outside of the historical norm. This is actually encouraging, because it means it really isn’t “different this time.”

It also tells us we should expect another spike in price.

#2: Industrial Demand is Growing—But Solar Demand Will Explode

Most silver investors know that industrial demand for silver is growing. But research shows that what’s coming for solar demand could catch both the industry and investors off guard. 


First, while solar use around the world has grown, check out the goal of the Paris Climate Accord.

Solar's Global Electricity Use

While goals from these types of organizations can be lofty, what we do know is where the 194 countries and EU will push their funds… where they’ll devote time and energy and resources… where they’ll incentivize behavior. 


In other words, even if they don’t hit their goal, we know the direction. And that direction means greater solar demand—which means greater silver demand.

In fact, this goal is already being aggressively pursued outside of North America. Research shows, for example, that China is already using double-sided solar panels. This means they can adjust the panels to capture both morning and afternoon sun. Since the US wants to “green the grid” too, it wouldn’t be surprising to see this in America and other countries soon—all of which means more and more silver will be needed.

It isn’t just growth in the number of solar panels; the amount of silver per panel will also rise. For example, some manufacturers are now producing multiple-layered panels to capture the maximum amount of energy from the sun. This too is in the early stages and implies more ounces of silver will be required to meet this growth.

There is a lot of research in this area, too much to cover here, but suffice it to say that it all points to a substantial increase in the amount of silver that will be needed for the burgeoning solar industry.

 

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Investing Professor
Investing Professor is the WealthCare Connect virtual instructor that provides members with educational investing content. All content is for general informational purposes only and does not constitute investing advice. Consult with a licensed investment professional before making any investment decisions.
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