Bulls have been eagerly awaiting silver's most recent run-up, according to Terry Tanaka
Here are some strategies for investors to benefit from the conditions that are favorable for a sustained upswing.
Time for my yearly piece where I give silver the boot. Why now? Because it seems to be breaking out based on one of my WhatsApp chats. According to legend, silver always breaks out. In reality, it never does.
I'm not aware of any metal that has as much potential or that you can rely on so completely to disappoint you, though platinum has been coming very close over the last 15 years.
Perhaps, however, this time is different. Allow me to begin with some front-line rumors. Three of my friends run silver mining companies as CEOs. Based in Latin America, all three of them have returned with the same narrative.
In order to sell ore, a miner would typically pay a business (usually a refiner) to remove it from their hands, treat it, and smelt it. These alleged off-take contracts typically cost between £120 and £180 per tonne of ore. However, refiners aren't charging anything at the moment. It is all being subsidized by someone.
I wonder if this is the massive, commodity-hungry country that starts with a C and demands silver for all those solar panels Ed Miliband is purchasing. This signal must be extremely bullish. It appears that we are about to enter a legitimate commodities bull market.
Remember 2021 and 2022? When Vladimir Putin invaded Ukraine, commodities skyrocketed and went crazy during COVID. After that, they fell. Perhaps 2021 - 2022, and a secular bull market in metals is imminent, was only an appetizer.
It has long enough been hinted at by the supply and demand figures. They have actually been hinting at it for so long that many of us have come to assume it will never occur. The following is why silver is a good investment.
You want to own tangible assets because, first of all, we live in a time when currency is depreciating. The monetary metals, gold and silver, do best in such an inflationary climate. Since ancient times, silver has been recognized as currency.
Silver as a metal for money.
Gold has always served as a store of value rather than a medium of exchange. National banks hold onto it. Institutions hold onto it. It is kept by individuals. In the past, except for high-value transactions, we used silver, copper, and nickel.
The gold rushes of the 19th century marked the end of silver's use as a medium of exchange. Nations were able to give up silver due to the enormous increase in the supply of gold brought about by the discoveries in South Africa, Australia, California, and Canada. (I go into greater depth about the history of the precious metals in my book The Secret History of Gold, which was released in August. ().
The Coinage Act of 1873, also known as the Crime of 73 by silver enthusiasts, was the catalyst for the demise of silver as legal tender in the United States. Due in large part to Portuguese gold discoveries in Minas Gerais, Brazil, the process started in the UK approximately 150 years ago.
Silver has little chance of becoming a medium of exchange again in these cashless times.
Therefore, it is incorrect to say that we are returning to the historical average of 12 or 15:1 when examining gold-to-silver ratios, which currently require roughly 100 ounces of silver to purchase one ounce of gold.
Even though the natural ratio of silver to gold in the Earth's crust is 15:1, this will not occur if silver is not used as currency. Not for a very long time. We have only once, for a single day, reached this 15:1 level in the past century: on Thursday, March 27, 1980. The goal of two brothers with the last name Hunt was to control the silver market.
I own actual silver, so there are plenty of reasons to invest in it. However, one of them shouldn't be anticipating that it will be monetized once more. If the world ends and fiat money collapses, you may be happy that you have silver, but you will have to deal with more serious issues like Armageddon.
A vital industrial metal is silver.
Let's look at silver's incredibly extensive industrial use now that we have eliminated it as money. You could write a book on silver's industrial applications. Particularly in this electronic age, there are a lot. Although it would be lengthy, the book might not be very good.
Silver-containing products are more difficult to find than silver-containing ones, whether they are electrical appliances or medical equipment. Every smartphone, computer, jet engine, and solar panel contains silver. Silver can be found in the best batteries. Deodorant, detergent, antimicrobial lab coats, wart treatment, 3D printing, plastics, jewelry, wood preservation, and water purification are some of its applications. New technology and the expanding middle class in developing nations are the subjects of this "picks-and-shovels" play.
The yearly demand for silver is approximately 1.2 billion ounces. Approximately 60% of that demand, or 700 million ounces, comes from industry (500 million from the electrical and electronics sectors, with solar panels accounting for 50% of demand); 22% comes from jewelry and cutlery; and 18% comes from investment.
The market is in deficit since the annual supply is only about one billion ounces (of which 80 percent comes from mining and 20 percent from recycling). So, the price is going up. The majority of silver is created as a byproduct of other mining operations, particularly those that produce lead and zinc. When BHP Billiton was the biggest producer of silver in the world, it was a byproduct.
Silver was frequently connected to the moon and magic in folklore. There is truly something magical about it because of how many different and pervasive its qualities are. Since silver has so many industrial applications, it is somewhat puzzling that the price has remained so low for so long.
Since the demonetization of the late 19th century, the terms "silver" and "price suppression" have frequently been used together. Some attribute this to dark forces, while others attribute it to market forces.
The word "suppression" is used whenever there is a sell-off. The shorts are hammered whenever there is a boom. There is nothing we can do about it, whether it is a conspiracy or not, so we must accept the market as it is.
But silver does have a romantic side. Its femininity and the moon may be related to that. Gold, which is associated with the sun, is thought to be masculine.
However, it tends to spark the public's imagination with its romantic lunar (or lunatic?) connotations, sometimes with disastrous outcomes. It did, rising to £50 an ounce (oz) in 1980 after only being £2 a few years before. It repeated the feat in 2011 when it went back to £50 before going bankrupt.
At some point, silver will return to £50/oz. It will surpass that amount at some point. When the mother of all stories takes over, silver will most likely reach £100 or even £200 per ounce. You will want to have purchased some silver stocks at that time.
Additionally, it will eventually return to £15/oz. You should not own silver stocks at that time.
Tips for silver investing.
Although it has generally followed gold rather than led it, silver has been in a bull market since the summer of 2022. However, silver has abruptly overtaken gold in recent weeks. Silver miners are also in the lead. That's the reason I'm bullish.
In fact, the silver miners have exploded. This is something I haven't seen in ages. I say it's beginning to feel like a real metals bull market because of this. The best ways to invest in silver and make money are as follows: there are four main ways to gain exposure to the price of silver.
One option is to purchase silver bullion, which includes coins and bars. Another is to purchase silver exchange-traded funds (ETCs). Spread bets, contract for difference (CFD), and futures are ways to increase your exposure. Silver miners are the last group.
Try the Pure Gold Company and tell them I sent you if you're looking for bullion. (They can store with you or deliver anywhere in the world. If you have the time and desire, you can frequently find antique silver, particularly Georgian silver tea sets, on eBay and other sites for less than the silver's spot value.
Recently, my friends from the Stage Golfing Society purchased a stunning silver trophy to use as a golf tournament trophy. You would make more money than they did if you melted down the tureen and sold it as bullion. Physical silver offers plenty of opportunities for arbitrage, provided you have the time and desire to look for them.
Exchange-traded funds (ETFs) are inexpensive and easy to use. Like any other share, you purchase them through your broker. The WisdomTree Physical Silver ETFs (LSE: PHSP) are available to investors in the UK. An additional choice is the Invesco Physical Silver ETC (LSE: SLVP).
ETFs that are leveraged twice or three times are also available. Warning: These can be good cars if you know what you're doing, but if you keep them for a long time, the costs can add up. The three-times leveraged option's ticker is LSE: 3LSI, and WisdomTree offers both long and short range options.
Additionally, there is the spread-bet and CFD options regarding caveat emptor. They can be extremely profitable if the market moves in your favor, but you could also lose a lot more than you initially invested. Make sure to control your risk by maintaining manageable position sizes and having an exit strategy in case the market moves against you. Making position sizes excessively large is the most frequent error.
Of the silver miners' pick.
Once more, the easiest way to purchase silver mining companies is through an exchange-traded fund (ETF) that tracks a basket of them.
The GlobalX Silver Mining ETF (NYSE: SIL, LSE: SILG), which is dollar-denominated and listed in both London and New York, is possible. The Amplify ETF Trust Junior Silver Miners ETF (NYSE: SILJ), which tracks small caps, is also available if you want to get really spicy.
The two largest pure silver plays listed in London are Hochschild Mining (LSE: HOC) and Fresnillo (LSE: FRES). I have a special place in my heart for First Majestic (Toronto: AG; NYSE: AG), which is run by my friend Keith Neumeyer, and my favorite large caps are Silvercrest (Toronto: SIL), Pan American (Toronto: PAAS), and Mag Silver (Toronto: MAG). The group has a bullion shop as well.
However, the true potential is found in the small-cap market. I wrote about Comstock Lode (NYSE: LODE), a recycling company, a few weeks ago. I'm happy to report that this company is now beginning to move, but there is still a significant opportunity here that is well suited to silver.
The company basically operates three businesses. a developing biofuels arm that is expanding. (Despite Comstock Lode's stock being worth only £100 million on the market, it has raised £1 billion for this subsidiary. Yes, you read correctly. ).
After that, it has mining properties in Comstock Lode, Nevada, which is how the group got its name. There was a significant silver rush in the 1860s at Comstock Lode. The famous shirt loss of Mark Twain occurred there. The area has produced between six and eight million ounces of gold and about 225 million ounces of silver through mining. The lode contains 600,000 ounces of gold and six million proven ounces of silver. This is also worth £50 million at the price of £50/oz for gold and £3/oz for silver.
Comstock owns £100 million worth of real estate in Nevada, a data-center nation. Finally, it maintains a growing solar panel recycling business in Nevada. The demonstration facility is operational and operating smoothly. The team is concentrating on obtaining the funds and equipment needed to build the next facility.
By 2030, the United States will have 33 million photovoltaic (PV) solar panels, weighing one million tonnes, and by 2050, ten times that amount, as the first batch of panels nears the end of its useful life. Due to California's recent ban on landfills, about 90% of panels are now buried out of state after being transported. Recycling facilities for loads are located right across the border.
Lode must invest £36 million to construct three plants. It can process 300,000 tonnes, or ten million panels annually, by 2030. It generates £600 for each tonne it processes, with an 85% profit margin. Assuming perfect execution, that translates into £180 million in earnings annually. They still require funding, and there are several options for this, including debt and equity.
A solar panel contains a lot of silver. Ask the Chinese. As a result, Lode will produce a significant amount of silver. It will become the largest producer of silver in Nevada, if not the entire United States, if its solar panel recycling business is successful.
Additionally, there is Sierra Madre Silver and Gold (TSX Venture Exchange: SM), which I have previously discussed in BFIA. After a period of gradual increase, this stock is currently trading at about £0.70. The previous year at this time, it was in the £0point 40s.
From being a development story to a producing mine, Sierra Madre now processes roughly 500 tonnes of ore per day (t/day). In the upcoming quarter, it is anticipated to produce 60,000 ounces of silver equivalent monthly. In doing so, it has exceeded expectations and completed this transition ahead of schedule. Since the stock fell to C£0.25 in 2024, it has nearly tripled. It is currently worth about £100 million on the market.
The business must now enhance its operations. At £29 per ounce, its price is fairly high. According to CEO Alex Langer, he can reduce them by £4 to £5 by making some equipment purchases (renting is costly). The crushers require some improvement work. Between 600 and 800 t/day of processing should be increased. With better equipment, this could reach 1,500.
A stock that can take off.
To do that and speed up the process, they might need to raise a small amount of money; cash flow will take longer to get there. This was probably being discussed when I spoke with Langer two weeks ago because he had just returned from a meeting with possible Palo Alto investors. However, this should also help reduce costs if they can reach 1,000 t/day.
Then, most likely in the first part of the following year, we might witness some exploratory drilling of the outer zones, which would greatly enhance the company's attractiveness.
They are eligible for inclusion in the Global X Silver Mining ETF, which could increase liquidity and encourage institutional buying, if they can raise the market capitalization of the company to £100 million USD.
This mine is a producing mine with potential for exploration, to put it briefly. It is beginning to generate a healthy profit and is inexpensive. Several analysts have set the stock's target price between C£1.10 and C£1.30. If the price of silver stays high, all of these are very attainable. This one still has a lot of potential, in my opinion. I am a content holder.
Terry Tanaka is the author of The Flying Frisby, an investment newsletter.
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