Silver is the latest mined material to experience an uptick in global demand thanks to its uses in electronics and clean-energy technologies, and a commodities expert predicts the price of the metal will continue to climb.
“I think that silver is probably the most exciting trade in the energy transition theme within the commodities complex today,” Daniel Ghali, a senior commodity strategist with TD Securities, told BNN Bloomberg in a Tuesday interview.
“What we're talking about here is a market that has been in a universally-recognized structural deficit… essentially driven by the boom in solar capacity across the world and the growing trend of electronics being embedded in everything that we do, but particularly so in vehicles.”
The price of silver was hovering just shy of US$32 an ounce in Tuesday afternoon trading – the highest price on record aside from brief spikes in the early 2010s and late 1970s.
Ghali said the metal’s recent bullish run is due to a historical lack of investment in silver-specific mines, which has led to supply worries in the industry as demand continues to boom.
“Silver is primarily mined as a byproduct of lead and zinc mines, of copper mines and of gold mines, so there are very few companies that mined silver specifically,” he said.
“As a result of that, the structural underinvestment into the mining space has resulted in this structural undersupply of silver that we're seeing today.”
Ghali added that until recently, supply-deficit concerns had been tampered by a “massive amount” of above-ground inventories that could be relied upon to balance gaps in silver markets, but he expects that to change.
“We think global inventories are probably overstated when you account for the amount of silver that is actually freely available for purchase, and as a result of that, we're probably in a situation that could lead to some pretty extreme price action in silver,” he said.
Ghali said he expects demand to continue to grow for the foreseeable future, but added that technology companies using the metal will likely “thrift out the silver content,” replacing it with cheaper and more readily available materials over time.
“So this is more a story over the next year or two, where you can see a temporary squeeze on prices that could relate to substantial gains,” he said.