Around 80% of the annual demand for silver comes from mining; the rest comes from scrap metal. When it comes to mining, newly discovered bags of silver have been lacking. Silver miners struggle to make money, and investments in exploring new silver territories are nominal at best. At the same time, there could be a shortage of supplies.
About 80% of the annual demand for billion-ounce silver comes from mining and the rest from scrap metal. There has been a shortage of important new discoveries. Many of the most active silver miners have had difficulty making money in recent years and investment in exploration is minimal. Gold and silver prices fell to lows not seen in two months at noon on Monday, according to data from Kitco.
Now that gold and silver prices are falling to their highs, investors may see little advantage in these stocks. The company was initially sanctioned by the United Kingdom and other countries as part of ongoing actions against Russia due to the conflict in Ukraine, but is now also facing the brunt of the fall in silver prices. The main long-term catalyst for silver is progress towards the ecological transition and the increasing adoption of electric vehicles, with the widespread use of metal in the photovoltaic sector as a key component of solar panels. In silver and also in gold, this is not really the case because demand exists in two very separate classes, industrial and monetary.
Retouching is only possible in these markets for extended periods of time because demand for physical silver (and also for gold) bifurcates into two discrete forms that have nothing to do with each other. Jeffrey Christian, managing partner of the CPM Group, believes that while the prices of gold and silver may be suffering a short-term hit, investors with a longer-term market view may view this fall in prices as an opportunity. More than a year after the short contraction in silver driven by Reddit, dubbed “the biggest short contraction in the world”, which brought silver prices close to 8-year highs, the metal is now trading close to its one-month high. Industrial demand for silver and gold includes jewelry, as well as standard industrial applications, whatever they may be.
This has led to renewed interest in safe haven assets, such as precious metals, which has also led to an uptick in silver. But if interest rates cannot be raised, the only way to stop the dollar rush and the flight to precious metals as a monetary reserve is to lower the price of silver on paper by shorting silver futures. While the silver price forecast is affected by supply and demand, it is also heavily influenced by investors who buy precious metals as safe haven assets during times of economic or political uncertainty. With the increase in selling pressure on precious metals, gold and silver stocks are also feeling pressure.
Monetary demand, if not suppressed, can easily become a positive feedback cycle, since the more value a monetary metal such as silver has in dollars, the greater the demand for having it as a monetary reserve rather than the dollar itself. One of the main reasons why silver is so affected right now is because it is considered both an industrial metal and a precious metal, so it faces the disadvantages of both.