Falling Supply, Surging Physical Investment, We May See Crazy Silver Prices

Few investors realize that the fundamentals for silver continue to improve each and every day. Unfortunately, the bullish case for owning silver is lost in a market that has gone utterly insane trading high-flying over-leveraged tech stocks and other assorted financial garbage assets. This is the way of the world presently… but a BIG CHANGE is coming.

As I have stated over-and-over again, the coming ENERGY CLIFF is going to change the world as we know it. Thus, the value of most Stocks, Bonds, and Real Estate will disintegrate when global oil production heads south in a big way. And, we have likely already begun the process, due to the massive economic lockdowns in combatting the global contagion… which seems to be heading into a second wave.

Amount Of Various Metals Annual Production

While the global contagion impacted global silver mining the most over the past several months, I believe it will deteriorate even further in the second half of 2020. According to a Reuters article, Mexico mining output to shrink 17% in 2020: industry group… this could impact silver supply considerably as Mexico is the largest silver producer in the world.

Here’s how I see the situation for global silver mine supply being negatively impacted this year and onwards.

1. The lockdowns of mines will impact two months of silver supply, mostly April & May. Most of the global mine supply affected by the worldwide contagion took place in Mexico and in South American, where most of the silver is produced.
2. Even after the world economies start to reopen, along with the mining industry, there has so much damage done to these economies; it will also hurt Global GDP in the second half of 2020 and likely into 2021. This will curtail base metal mining where 55% of silver comes from… as a by-product of copper, lead, and zinc production

Now, this leads me to the following chart. Global silver production peaked in 2015 and continues to decline while gold output hit a new record high last year:

Global Silver Production Vs Gold Production 2008-2019

Global silver production peaked in 2015 at 894 million oz (Moz) and declined to 836 Moz last year. While global silver production declined since 2015, world gold production increased from 104 Moz to 111 Moz. Thus, the global silver mine supply fell 6% since 2015, while world gold production increased by 7%.

To make matters worse for the silver supply, the impact of the global contagion will likely shrink production by another 30-50 Moz. So, there is an excellent chance that world silver mine supply falls below 800 Moz, to 785-795 Moz for 2020. Hell, it could be even lower if the situation continues to get worse in the second half of 2020.

The overwhelming majority of investors have no idea how undervalued silver is as an asset. With falling supply and surging physical investment demand in the future, we could see some crazy silver prices.

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