Analyst Expects Silver Supply Crunch As Price Drops

Although gold prices have stabilized at just below $1,175 an ounce, silver has seen its fortunes dim in recent days. Prices for the metal dropped significantly toward the end of August, going down by more than 28% in value against the U.S. dollar since early March.

On Aug. 20, 2022, silver prices dropped by 2.33% against the dollar in just 24 hours, signifying that the decline in silver metal prices may not be ending any time soon. Even so, David Morgan, founder of the Morgan Report, believes that there will be a supply crunch in the silver market that could cause silver prices to shoot up. Furthermore, he thinks that despite reduced prices, silver will end up being one of the best investments of this decade.

A supply crunch refers to a period where the demand for a product far exceeds its supply on the market, leading to higher prices for the product. Silver, however, hasn’t seen a surge in demand in recent years as more and more investors have poured their cash into other assets such as gold, which is a traditional safe haven asset, and cryptocurrencies. Cryptos may not be as stable over the long term as gold, but they have grabbed investor interest due to the numerous benefits offered by decentralized blockchain technology.

On the other hand, silver has not performed well in comparison to metals such as gold, with both silver mining stocks and silver spot prices underperforming in the S&P 500 for most of 2021 as well as the second half of this year. In early 2022, silver prices peaked at $24.46 per ounce before steadily going down. The metal has dropped by more than 28% in value since then and, as of Aug. 20, was trading at $19 per ounce.

Despite this massive drop in value, Morgan strongly believes that there will be a crunch in silver supply in the next decade. Speaking to a Kitco news producer, Morgan said that the world’s supply of silver could feasibly run dry in the near future.

Data from the Silver Institute shows that in 2022, global demand for silver will reach an all-time high of 1.112 billion ounces. Morgan predicted that silver demand would clear the market of the available supplies, pointing out that industrial applications could gobble up all the silver supply at some point in the future.

With overwhelming demand and limited supply, Morgan predicts that silver prices will soar as the decade progresses. He concluded that silver could end up being one of the best investments of the decade.

For mining companies that have been in the business for more than a century, such as Hecla Mining Company (NYSE: HL), these types of dips seen in the market from time to time are expected and don’t affect the long-term outlook of the industry.

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