Three Unstoppable Forces Set to Drive Silver Prices / Commodities / Gold & Silver 2020
The threat of economicallycrippling lockdowns, the promise of unending monetary stimulus, and theuncertainty of game-changing political outcomes – this is the “new normal” forinvestors.
The COVID pandemic won’t beeradicated anytime soon. And even when it finally is, the economic and socialcosts will continue to be borne for years to come.
In such an environment, allconventional asset classes carry heightened risk. Certain types of assets,though, may now be well positioned to shine.
Among them is silver.
With politicians andcentral bankers desperately trying to paper over real economic losses withartificial stimulus, the outlook for the value of the U.S. dollar looks bleak.
A record $3.1 trillionfederal budget deficit combined with an explicit new inflation-raising campaignby the Federal Reserve puts holders of dollar-denominated paper assets injeopardy.
Hard assets in general andprecious metals in particular act as a natural countermeasure to currencydepreciation.
Some commodities, such ascrude oil, have suffered greatly in recent years amid the push for “green”alternatives to fossil fuels. Dramatic growth in electric vehicles and solarenergy installations is likely to continue, regardless of the upcoming electionoutcome.
The upshot is that allviable alternatives to fossil fuels require massive amounts of metals – fromcopper to nickel to silver torare earths.
“Silver is found invirtually every electronic device. If it has an on/off button, it’s likely thatsilver is inside,” according to the Silver Institute. “Silver’s excellentelectrical conductivity makes it a natural choice for everything from printedcircuit boards to switches and TV screens.”
As cars become moretechnologically advanced and more likely to be powered by batteries, they willrequire larger quantities of strategic metals including silver. The motorvehicle industry already consumes over 36 million ounces of silver per year –and that number will surely grow as global demand picks back up.
The trend toward moremetals-intensive energy development could accelerate if Joe Biden wins thepresidency and Democrats take over the Senate.
Biden now says he rejectsthe most extreme planks of AOC’s “Green New Deal” platform, including a ban onfracking. But he is still vowing to push through a multi-trillion-dollar greenenergy program of his own.
Regardless of the electionoutcome, most of America’s largest corporations will continue to pursueenvironmental, social, and governance (ESG) targets. In recent years,shareholder activists including government pension funds have successfullyfoisted their ESG demands upon corporate America.
It’s why today fast-foodcompanies feel compelled to virtue signal their support for everything fromreducing their carbon footprint to implementing critical race theory tocelebrating transgenderism. What does any of this have to do with sellingburgers?
It has to do with the factthat taking up politically fashionable causes is nearly a prerequisite fordoing business as a publicly traded company. A low ESG score means beingprotested by activists and shunned by institutional investors.
A company can score ESGpoints by making commitments to “diversity” or capital investments in solarpanels, for example. This means that demand for green technologies can farexceed the actual utility they deliver.
Demand for photovoltaicsolar systems is expected to explode in the years ahead. This yearsolar-related stocks have been among the hottest performers in the market.
But as demand continues togrow, the solar industry could soon run into a serious supply problem incritical metals including silver.
Photovoltaics are one ofthe fastest growing sources of industrial demand for the white metal. Silversaw a 7% increase in such demand last year to over 85 million ounces.
Meanwhile, investmentdemand for silver bullion has been surging in recent months at the same time asmining supply is contracting due to adverse economic and political (lockdown)conditions.
Silver often trades in avolatile manner. That volatility could be amplified depending on how theelection turns out and how much of a toll the virus takes in the coming weeks.
Regardless of whether thefutures market reads a particular development as “good” or “bad” on any givenday, three major long-term drivers of silver price appreciation appearunstoppable:
TheFed will continue to pursue inflationary stimulus regardless of the electionoutcome.Insatiabledemand for solar energy and various electronic applications will continue touse up more silver.Amining supply deficit in silver will contribute to market tightness andpossible bottlenecks that render refined silver products difficult to obtain byinvestors and industrial users alike.At some point, higher silverprices will send market signals that alleviate the supply and demand crunch.But that point may be years away – and multiples of price appreciation ahead.
Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.
© 2020 Stefan Gleason - All Rights Reserved
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