Silver’s Next Wave Starts Now

Precious metals are starting to get their shine back.

Silver is now up $10/oz from its recent low of around $70/oz. Gold is up more than $400 from its dip to $4,400/oz.

Bullion is looking good here.

Miners are clawing back gains as well. The GDX gold miner ETF is up from a low of $79 back on 3/20 to $98 today. The SILJ silver miner ETF has bounced back to $32 from $26.

However, let’s not pop the champagne on miners just yet. The situation in the Middle East remains uncertain.

The ceasefire is holding for the most part, which is encouraging. But the Strait of Hormuz is still closed. And as we’ve pointed out many times, we are still miles apart from Iran on negotiation terms.

Higher oil prices mean higher costs for miners. So for now, I think the outlook for physical metals looks more certain than miners.

The world seems to think this crisis is over, but I’m not sold on that idea yet.

However, if (when) oil prices return to the below-$70 per barrel level, it’ll be off to the races for miners again.

We just don’t know when that will be. So for now, my recommendation would be to invest new money into physical gold and silver rather than miners. That can either be in the form of coins and bars, or ETFs like Sprott’s Physical Silver Trust (PSLV) and Physical Gold Trust (PHYS).

Today we’re going to focus on silver, and explain why we should see $100+ prices again soon.

Solar Demand Surges Silver Higher

Even before the conflict with Iran, energy prices were rising around the globe thanks to a surge in data center construction.

Now the world faces additional energy inflation, with oil and gas prices up sharply.

And as we predicted a few weeks ago, this is leading to a surge in demand for solar panels.

Around 19% of total silver demand comes from solar panels. Silver is the best conductor of electricity, and resists corrosion much better than copper.

So the tiny electrical connections on solar panels use silver, as shown below:

Solar panels can function for decades thanks to silver’s unique properties. And even with the metal at around $80/oz, it’s the only good option.

We shouldn’t be surprised that in the wake of this energy crisis, solar demand is booming. Here are a few recent headlines from around the world:

• BBC: UK Sees Surge in Solar Panel Demand Amid Rising Energy Costs
• Bloomberg: Malaysia’s Biggest Solar Firm Sees Jump in Demand on Iran War
• Impakter: Suniva to Invest $350 Million in South Carolina Solar Plant

Even once this crisis is resolved, I expect the world to continue installing solar at a rapid pace. Especially in the Asia-Pacific region.

Asia has now seen how quickly oil and LNG imports can disappear, and will look to reduce their dependence on imported energy. And that means a lot more solar power.

Silver’s Shanghai Premium

As I write this, silver is trading at around $79.20 per ounce in the U.S.

In Shanghai, China, however, it’s trading at $89.50. That’s a hefty 13% premium.

Source: GoldSilver.ai

The price is significantly higher in China due to the fact that China’s silver markets are based around physical metal. Much of their silver gets used for industrial manufacturing.

Almost 90% of solar panel manufacturing takes place in the country. There’s also a robust silver investing community in China.

Meanwhile, here in the U.S. we primarily trade silver as a paper contract on the COMEX. There is a growing silver investment movement, but it still hasn’t reached its potential yet.

The Shanghai premium means that physical silver supplies remain tight. Buyers are bidding up the price locally.

Industrial demand looks strong going forward.

What About Silver as an Investment?

We had our first real outbreak of silver fever late last year into January, when prices briefly reached $120/oz.

It was a perfect storm of booming industrial demand, combined with rising investment buying.

That was the first wave. I believe we’ll see another one soon.

Silver is the precious metal for everyday people. Gold led the way during the early stages of this bull market, driven largely by central bank buying.

And I think gold will do fine going forward. But the setup for silver looks even better. When that combination of booming industrial + investment demand hits again, we’re going to see fireworks.

In the midst of this energy crisis, it’s easy to forget we’re also due for a debt/credit disaster. And whenever that one kicks off, demand for silver (poor man’s gold) is going to skyrocket.

So despite all the chaos and change in the world economy, silver remains my favorite way to play precious metals.

It’ll be volatile. But the stars are once again lining up. Over the next few years, I remain confident we’ll see $200/oz silver.