The silver price has taken quite a nosedive since this May. The price per kilo fell from +/- €750 to just over €660 in less than two months. Short positions were also at the highest level since March this year.

Silver price recovers rapidly

Last week, the silver price recovered at a rapid pace. The closing price on Wednesday 30 August 2023 came to just over €730 per kilo, silver is thus almost back at the level of the beginning of this year.
Relative to the gold price, the silver price is hugely volatile. The combination of short covering, stimulus measures in China, the Fed's upcoming pivot and the rising structural shortage in silver provide little grip on the silver price.
Structural deficit in the silver market
For years there was a small surplus in the silver market, but since 2021 there have been shortages in the silver market. In 2022, the silver deficit ran up to 237 million ounces, for your imaging, annual production is around 850 million ounces.
This year, the shortage is expected to reach around 160 million ounces, about 19% of annual production. The shortage is mainly due to the growing demand for silver for the production of solar panels and electric cars.

Solar sector depletes global reserves

A study at the University of New South Wales predicts that the solar sector could deplete between 85% and 98% of global silver reserves by 2050. This assumes about 5-10 years to bring them back to current levels says Dr Brett Hallam - one of the study's researchers.
In the process, the number of new silver discoveries is declining, making it more difficult for silver mines to extract silver from the ground. More and part of the production comes along as a by-product from the ground when mining zinc, lead and gold, among others. Primary silver mines need a certain yield to continue to exist. With current price levels, it is not profitable for these silver mines to continue mining silver. This means it will only pay off again once positive price signals are sufficient to boost output.

China major player in silver market

China is the largest silver importer worldwide. Mordor Intelligence, a global market research consultancy offering in-depth market analysis reports and advisory services, has conducted market research on the size and share of the silver market. In doing so, they have made growth trends and forecasts for the years 2023 to 2028. This research shows that the ‘’Asia-Pacific‘’ region will dominate the market in the coming years. Indeed, China is the largest producer of solar panels and Chinese car manufacturers have a global market share of 38% with further expansion almost a guarantee.

Silver undervalued

Over the last 20 years, an investment in silver brings and average return of 9% per year. At the time of writing, the silver price is quoted at €22.70 per troy ounce. Silver's all-time high is slightly below $50 per troy ounce, this was in April 2011.
According to several analysts, silver is the ‘’most undervalued commodity in the world‘’. The silver market has been manipulated for years to keep the price low and the question remains to what extent this has been stopped. In addition, there is a structural shortage of silver and this shortage is only expected to increase further in the coming years.

Buying silver at The Silver Mountain

At The Silver Mountain, you can choose from a wide range of physical silver products. If you want to invest in physical silver, you have the choice of silver coins, and silver bars.
However, silver is considered a commodity and for this reason 21% VAT is added to the price of silver bars. This does not apply to silver coins and coin bars, as these are traded under the margin scheme. So if you want to invest in physical silver as a private individual, we recommend choosing silver coins or silver coin bars. Want to read more about VAT on silver? You can do so here.