Silver: The ‘devil’s metal’ rides out.
There has been considerable controversy over the likely supply/demand fundamentals and future pricing situation for silver, following on from the attempts a month or so ago to drive up the price with a short squeeze. True the big bullion banks hold massive short positions in silver on the COMEX, but most also carry large physical bullion positions too, which tend to counteract silver’s vulnerability to such moves.
Pierre Lassonde, former CEO of Newmont and co-founder of Franco Nevada, who’s been around a long time, describes the fixation with the silver shorts as ‘loony tuney’. That’s not to say he’s not positive on the silver price, though. He is!
Lassonde feels that the future lies in three metals – copper, gold and silver. On gold he’s looking at perhaps up to 5-8 years to see it really break out and surge in price – and where gold goes, silver tends to follow.
While Lassonde was looking specifically at the purchase of silver during the exceedingly short lived social media-promoted silver squeeze episode, he did express one element of positivity. Those who bought silver purchased a metal which did have inherent value in its own right. So unlike in an equity bubble and subsequent total price collapse, silver still retained some value. In fact, the silver price came back a few percent from its peak, – just worth a few dollars less than they may have paid for it. A salutary lesson perhaps, but probably not a disastrous one in most instances.
Silver is not only contentious because of perceived manipulation by the big banks and governments, which may indeed be happening – all financial markets are probably manipulated to some extent by the big money. However, the silver price prediction dichotomy is also because there are not only hugely supportive silver bulls out there, but there is also a significant element among analysts and commentators who really do see silver as the ‘devil’s metal’ and thus prone to enormous price fluctuations. This is not helped by the sometimes conflicting views on supply and demand fundamentals for the metal. Currently silver seems to be consolidating at, or around, the $26 mark. If gold takes off, silver may too.
On balance supply would seem to be plentiful, but industrial usage continues to grow (silver is very much a ‘green’ element in the fight against climate change) while its anti-bacterial and anti-viral properties mean that demand in the medical sector also continues to be strong. It remains much in demand in the jewelry industry, particularly as the gold price rises, and it is also in demand, of course, as a safe haven asset.
Given that the silver price usually tends to move in lockstep with the gold price, but often at an enhanced rate in a rising market, some analysts remain positive on silver for the remainder of the current year at least. Indeed silver prices may stay elevated for as long as the Fed keeps interest rates at the current ultra-low levels.
Even if the Fed bows to inflationary pressures and is forced into raising rates, this is still unlikely to bring them out of their current real negative pattern. Thus they would likely remain positive in effect for gold, and thereby silver too, once detailed analysis of any such move kicks in.
So all in all, I come down on the side of the silver bulls. If gold continues to advance, then silver may too – but then with its ‘devil’s metal’ attribute nothing can ever be certain with silver!
by Lawrence Williams
Lawrence (Lawrie) Williams is a highly regarded London-based writer and commentator on financial and political subjects, specializing in precious metals news and commentary. He graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London. He has contributed articles on precious metals to the Financial Times, Sharps Pixley, US Gold Bureau and Seeking Alpha among others.
The opinions expressed in this article are the author's own, do not necessarily reflect the opinions or views of Rosland Capital LLC or its employees, and do not constitute financial or investment advice or recommendations from the author or Rosland Capital or its employees. The author is compensated by Rosland Capital for his articles.