Why Do We Have a Silver Shortage Today?
Let’s start with the fact that we are consuming (using up) silver through multiple industrial applications such as solar panels, electric vehicles, data centers, medical devices, military materiel, etc. Many of these uses have exploded in recent years (not just the missiles), until in 2024, such industries consumed 680 million ounces, representing 59% of total global demand. Because of its electrical conductivity, silver has become an essential element in modern technology. Furthermore, at current prices, it’s not worth recycling any residual amounts.
Some of the demand for solar panels and electric vehicles (EV) has been encouraged by government mandates and tax incentives. Additional demand has occurred as a result of government (central bank) stockpiling of gold and silver, especially now that gold and silver are both recognized as Tier One assets by the Basel Committee on Banking Supervision in their Basel III Accord.
On the supply side of the equation, we find that 73% of silver comes from the mining of other metals, such as lead, zinc, and copper, while only 27% comes as the primary metal mined. Thus, during recessionary times, less silver is mined because less of the other metals are mined.
Then there’s the bureaucratic red tape involved in getting a silver mine operational. It could take anywhere from 10 to 30 or more years to get permitted, overcome environmental objections, satisfy “not in my back yard” protesters, and begin producing.
In some countries, there’s also the risk that the government may nationalize the mine after it’s productive. Other risks include the risk of mining accidents, kidnapping of key personnel, and running out of silver that is economical to extract.
Still other countries simply ban the export of silver. Think China, Russia, and India. Also, any tariffs imposed or threatened (and retaliatory tariffs) increase the cost of silver imports, and thus the quantity imported. Both export bans and tariffs reduce the amount of silver available for trade around the world.
These supply constraints have caused a supply deficit during the last five years. In other words, more silver was consumed than was mined and refined during that time.
In the United States, silver (along with other metals) has been categorized as a national security concern. In other words, the U.S. government finally woke up to the fact that silver is critical for national security and that other countries have been stockpiling it for years. When something is necessary for national security, that’s one small step away from having the government impose trade restrictions and export controls. There’s even talk of adding price floors for silver and other rare earths.
Of course, it’s one thing to find silver and get it out of the ground, and another thing to refine it. Currently there is a backlog of silver refining because of the heavy demand and limited refining capacity. This backlog could last for six months or longer, depending on the demand for silver.
Another factor which has reduced the supply for 20+ years is the fact that eight major banks have been using the U.S. futures markets to suppress (manipulate) silver prices. The long-term results were a lower silver price and a lack of incentive to mine more silver. The man who chronicled this manipulation from the start was Ted Butler.
And lastly, let’s talk about inflation. That means the expansion of the money and credit supply. As a result of the increase in the money and credit supply, the value of the U.S. dollar has substantially decreased since 1914 when the Federal Reserve Bank was put in charge of maintaining the value of the U.S. dollar. This decrease in the value of the dollar has been reflected in the price of silver which is seen as a safe-haven asset during times of inflation. This leads to stacking/hoarding by individuals, corporations, and governments which exacerbates the silver shortage.
Because the U.S. government is deep in debt and spending money it doesn’t have, and it has a track record of seizing gold from U.S. citizens, there is a distinct possibility that they may come again and this time for both gold and silver.
What are you going to do next?
Robert F. Sennholz