Weak economy, contracting production plus strong demand could push silver price to $40 by mid 2022
(Kitco News) - The price of silver could possibly surge to $40 an ounce by mid 2022, James Anderson, CEO and Chairman of Guanajuato Silver Company predicts. But Silver has continued to underperform 2021 estimates, currently hovering at about $23 an ounce.
Anderson explained why he is so bullish on silver. "If we have a weak economy coupled with a drive towards needing and using more silver, you're going to have base metal mines shutting down that produce silver as by-product, just as an enormous demand for silver comes to the fore," he said. "In that environment, you could easily see silver go to the $40 price range. But it is more likely we will see silver at $30 before it hits $40. I can see it hitting $40 halfway through next year."
Anderson, who is also a 20 year veteran of the financial services industry, spoke to Michelle Makori Lead Anchor and Editor-In-Chief of Kitco News. Guanajuato Silver Company (GSilver) is a Canadian based mining development company engaged in reactivating past producing silver and gold mines near Guanajuato, Mexico.
Anderson spoke about silver as a play against the devaluation of currency, and at the same time silver's demand for industrial use. "Silver is a unique hybrid of those two things. It's what causes the volatility that silver has," he emphasized. "But going forward, the additional uses of silver in the solar panel industry, and in the electric vehicle industry, those uses are well documented too."
"There is no large supply above ground of silver, whereas there is a large supply of above ground gold. So when a supply demand crunch comes on silver, it could affect the price very dramatically, and in a very short period of time," he added.
"I think as governments around the world continue to destroy the intrinsic value of all of the Fiat currencies - all of the paper currencies - not just the U.S. dollar, but also the Euro, Wan, Yen, British pound, Canadian dollar, there will be more and continued strength in silver and gold," Anderson said.
The Biden administration has shut down pipelines, implemented additional oil and gas regulations, and effectively made the U.S. dependent on foreign oil once again. At the same time, there's been an aggressive push to decarbonize. Anderson spoke about the impact these policies are having on the energy markets.
"Simultaneously, we have all kinds of different components to the energy market -- restricted and constricted. At the same time there is a lot of new, fresh demand for energy. And that energy is coming from various places," Anderson said. "In a very similar way, you can have a constriction of silver production and at the same time have a large spike in demand."
In terms of the biggest risk the markets are facing Anderson said, "It would be a fairly sudden deflationary implosion. We have inflated and inflated and inflated our way into higher asset prices, whether they be stocks or real estate around the world," he emphasized. "There's a very grave risk if there's any sense of tapering, or interest rate rises, or even just the hint of that or the hint of taking away some of the further stimulus. In that case, it would be natural to have a sharp, shock to the downside in equity markets, and certainly other asset markets around the world."
Anderson also discussed the impact a deflationary implosion would have on gold and silver. "Gold could have a sharp shock to the downside before it starts to recover very quickly and very powerfully," he said. "Silver would be that in spades. In this type of deflationary event there would be no bids on anything for a brief time period. That will be the case for silver as well. I have no idea of how far the price will fall, but it will recover very sharply as well."
Anderson also discussed his new project in Mexico. "We have become Mexico's latest silver and gold producing company. We are producing silver and gold at the El Kubo mine in Guanajuato, Mexico," he explained. "We would have not gotten into this venture had we not been positive and bullish on the prices of precious metals, specifically silver. Silver will always be more volatile than gold. That's just an historical norm."
Guanajuato Silver is focused on the refurbishment and swift re-commencement of production at its El Cubo mine and mill, and it's nearby El Pinguico project, as well as the delineation of additional silver and gold resources through underground and surface drilling.
For more on Anderson's views on silver, please watch the full video above. Follow Michelle Makori on Twitter: @MichelleMakori