News & Opinions About Gold & Silver

October 04, 2023

Silver Prices Poised for Rapid Uptick

Silver Prices Poised for Rapid Uptick

Physical Silver shortages are driving prices of Silver rapidly toward the $30 price level. Shortages earlier this year are not just a U.S. problem due to unprecedented demand, but the problem has hit foreign markets too.

Investors Seeking Out Physical Silver Coins

Demand for physical silver has skyrocketed in 2021. Physical shortages at coin dealers were acute internationally. New American Silver Eagles from the US Mint were out of stock at even the largest US-based dealers and are only selling in presales at near 50% premiums. Some London-based precious metals retailers found themselves completely out of silver coins.

  • Premiums on physical silver coins were at records and shortages were widespread internationally. This is only possible if silver futures are not priced for a sudden flood of monetary demand.
  • Monetary demand tends to feed on itself, as the higher the price goes for a monetary asset like silver, the higher the demand for it goes, risking a dollar run.
  • Monetary demand for silver suddenly woke up in early February, causing shortages and rare backwardation in silver that we last saw in March 2020, September 2015, and February 2011.
  • After each of those backwardation periods, the paper price of silver skyrocketed within months as arbitrageurs moved in to bridge the physical/paper gap.
  • This backwardation is most similar to February 2011, with silver nowhere near lows, and if history rhymes, it suggests we are only months away from $50 silver.

In our opinion, Silver prices are bound to rise above $30 in coming weeks as the “paper” futures price of Silver is imbalanced against the price of physical Silver. That suggests buying Silver coins is a good decision because a price explosion of physical Silver is quite likely by Fall. We’ll wait and see.