Silver is typically seen as the underdog in the precious metals arena. However, the dynamics of the silver market are shifting rapidly and we believe it's high time to recognise its potential. Our Silver Standard (AGS) token stands to significantly benefit from these changes, and here's why.
It's common to discuss silver's value in relation to inflation, particularly given the Federal Reserve's current struggle to control its persistence. This undeniably strengthens the case for precious metals like silver. What's often overlooked, however, is the looming supply constraint in the silver market. The demand for silver is surging, largely driven by expanding sectors like green energy. Yet, the silver supply seems to be blissfully unaware of this impending reality.
This supply shortage is not a distant future event; it's already taking shape. Last year saw record demand for silver across all sectors, while the supply barely managed to keep up, resulting in a significant market deficit of 237.7 million oz. This deficit, dubbed by the Silver Institute as "possibly the most significant deficit on record," comfortably exceeded the combined surpluses of the previous 11 years.
Unfortunately (or fortunately), this trend shows no signs of reversing. Declining silver production is the result of underinvestment, a problem that cannot be quickly fixed due to the significant lead time - often over a decade - needed to initiate new mining operations.
At the same time, the demand for silver is on the rise, primarily driven by the solar power industry. The International Energy Association (IEA) predicts that by next year, investment in solar power will surpass that in oil production.
Why does this matter for silver? Because of its superior electrical conductivity, silver is an essential component of solar panels. Despite the small amount used in each panel, the cumulative demand, considering the increasing production of solar panels, is nothing short of significant.
Recent estimates suggest that by 2027, solar manufacturers will require over 20% of the current annual silver supply. Even more striking, by 2050, it's projected that solar panel production will consume nearly all of the existing global silver reserves.
Contrary to previous assumptions that the use of silver in solar panels would decrease, new research indicates a reverse in this trend. Advanced, more efficient technologies require even more silver than current models, which could substantially drive up silver demand.
While there are ongoing efforts to find cheaper alternatives to silver, the current rate of silver usage reduction won't prevent an increase in demand. If anything, transitioning to high-efficiency technologies could massively inflate the demand for silver, posing serious price and supply risks.
Some may argue that economic downturns could curb the industrial demand for silver. However, as the world rallies to fight climate change, sectors like the photovoltaic industry are becoming recession resistant. Global efforts and investments in green energy technologies continue to increase, regardless of the economic climate.
All these factors highlight a surge in silver demand amid a restrained supply environment. Basic economics tells us that a rising demand without a corresponding increase in supply will inevitably push up prices. Yet, the current silver pricing does not reflect this impending market reality.
When we compare silver to gold, its undervaluation becomes even more evident. The current silver-to-gold ratio is over 81-1, meaning that it takes over 81 ounces of silver to purchase one ounce of gold. Historically, this ratio hovers between 40:1 and 50:1, indicating a significant deviation.
Historical trends also show that when this discrepancy corrects itself, it doesn't do so gradually. Rather, it happens abruptly and forcefully. We've observed this occurrence four times since the year 2000.
As we approach a future characterised by silver shortages, driven by an increasingly demanding photovoltaic industry, we cannot ignore the potential impact on silver pricing. Once the mainstream media starts paying attention to these substantial shifts, we may be on the verge of a significant price surge in the silver market.
In conclusion, we believe it's only a matter of time before the silver market garners the attention it deserves. As these developments unfold, our Silver Standard (AGS) token, backed by physical silver, stands in an excellent position to benefit from this anticipated silver boom. So, when silver shines, so will our AGS token.
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