Peter Krauth, editor of Silver Stock Investor, provided his latest thoughts on the silver market, honing in on his theory for why the metal’s price hasn’t risen in the face of substantial deficits for the last several years.
Speaking at the Prospectors & Developers Association of Canada (PDAC) convention, he acknowledged investors’ frustration with the metal’s price — despite four years of consecutive supply shortfalls, it has largely gone sideways.
‘You’ve got three aspects to this,’ Krauth explained. ‘You’ve got industrial … supply — this goes to users that make solar panels, that do electronics, all sorts of things like that. You’ve got the investment side of it, so people who are actually buying physical coins and silver. And then you’ve got sort of this area where, when there is oversupply in a given year, that gets shunted into the inventories of things like the futures exchanges, exchange-traded funds (ETFs), for example.’
Continuing, he said silver is being drained out of these inventories, which he referred to as secondary inventories.
‘Here’s my take,’ Krauth said. ‘I believe that you have numerous industrial consumers buying long futures contracts and/or buying silver ETFs, and then asking for delivery. When the futures contracts mature, they can stand for delivery.’
He noted that the registered silver — metal that is available for delivery — has declined by about 70 percent over the last three or four years. And in his view, it won’t be too long before there’s no more of this silver out there.
‘If I had to guess, I would say maybe a year, 18 months, two years max,’ Krauth said on the sidelines of the event. ‘At some point, there will be no more secondary silver available — someone’s going to stand for delivery on a futures contract, and they will be told, ‘Sorry, we can’t deliver, we’re going to have to … pay you out cash.”
He believes that’s when the the entire sector will finally ‘wake up in a big way.’
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.