Kris Holthe is a precious metals broker with Calgary-based New World Precious Metals
Silver squeeze 2.0 is scheduled to start today, Monday March 31. Investors in the silver community are teaming up to make an attempt to improve the metals price by forcing additional physical silver deliveries in an already tight market.
The idea is to take as much physical silver off the market, whether it is by taking deliveries through the COMEX (Commodity Exchange) or buying retail metal from local sources. The success of the movement is yet to be determined. The current supply deficits are real so the timing of the movement does have potential.
Silver squeeze 1.0 occurred in 2021. Retail investors banded together through platforms like Reddit’s WallStreetBets to apply pressure to institutional players by buying up physical silver and causing supply shortages. While the movement didn’t fully succeed, it did briefly raise prices and put pressure on supply. It proved to the community they could influence the market. One of the more positive outcomes is that it put a spotlight on silver as an investment, to investors previously unaware.
The movement was largely started due to frustrated silver investors who understand the strategic importance of silver and are concerned about perceived price suppression by the market makers. Years of undervalued pricing, met with higher and higher demand, provoked the investors to pull back the curtain and show the world the true value of the metal.
Silver is the most shorted commodity that exists. It has been for a long time. What is it about silver that is so important that the market makers take excessive effort to make the investment so boring?
Artificial price suppression frustrates existing investors and dissuades future participation. Silver has a long history as an important monetary metal and more recently, is becoming an ever increasing and irreplaceable industrial metal. It could be that nations have an interest to prevent hoarding by the general population.
The historical high in silver occurred in 1980 when silver hit its all time high of US$50/troy oz. In today’s dollars, adjusted for inflation, the price would be closer to $180/oz. That is the calculation using the government-supplied inflation numbers.
Silver mining production peaked in 2016 at 900 million ounces and been slowly declining with current production at 823 million ounces. Of that, 60 percent of the silver mined gets used in industrial applications such as solar, electronics, medical and military. Industrial demand has increased by 60 percent over the past 10 years and continues to grow as technology advances and the world moves toward greener forms of energy.
Most annual silver mine production — 70-80% — comes as a by-product of other mining operations such as copper, lead or zinc. The relatively low price of silver has reduced profitability to mine the metal as a pure play. It takes many years to get a new mine to production and good deposits are becoming harder to find. These factors make the silver supply inelastic. A sudden increase to price cannot automatically increase supply to meet demand.
Silver has a number of unique characteristics that make it irreplaceable in high tech. It has the best electrical and thermal conductivity of any element and is highly resistant to corrosion.
In 2024, Samsung announced the creation of a Silver-Carbon solid state battery. The battery is smaller, lighter, has a 600 mile range on a 9 minute charge, and has a 20 year-life span.
But, the battery contains much more silver compared to the traditional electric vehicle batteries. If this new technology becomes commonplace and expands into other transportation sectors it could have a meaningful impact to the silver supply/demand fundamentals.
Silver has increased in value by 35% in the last 12 months but I still consider it inexpensive.
I believe it is the most undervalued commodity given it strategic importance. As gold becomes unaffordable to the average investor, silver — currently being 90 times cheaper — remains affordable. Silver and gold generally move together, with gold taking the lead. Given that gold is continuously making new record highs, it is clear that silver has a long way to catch up.
Kris Holthe is a precious metals broker with Calgary-based New World Precious Metals.