(Kitco News) - The silver market is experiencing significant manipulation due to its dual role as both an industrial metal and an investment commodity, according to Keith Neumeyer, CEO of First Majestic Silver. Market manipulation remains rampant and is driven by trading desks at major banks that treat silver as just another number on a screen, often ignoring its fundamental value and significance.
Neumeyer told Jeremy Szafron, Anchor at Kitco News, "These traders that work, and I used to be a trader on the floor, just think of it as a number on a screen. They don't realize this is an important metal that should be trading at a much higher price."
Supply-Demand Fundamentals
As of mid-July 2024, the global silver deficit is expected to rise by 17%, reaching 215.3 million ounces. This increase is primarily driven by a 2% growth in industrial demand coupled with a 1% decline in supply, according to the Silver Institute.
The demand for silver spans various industries, including electronics, solar panels, and electric vehicles, all of which are seeing robust growth. This persistent deficit underscores the strategic importance of silver and its crucial role in advancing technology and renewable energy solutions.
Neumeyer stated, "Silver is not gold. Silver is a commodity, a strategic commodity that we need as a human race to accomplish all the things we want to do. Everything we construct requires some component of silver." The Silver Institute also reported that despite a 30% decrease in the deficit last year, it remained substantial at 184.3 million ounces.
Silver's Growing Deficit: What It Means for Investors
The silver market has been in a structural deficit for four consecutive years, with the current deficit standing at 240 million ounces, according to The Silver Institute. This shortfall is substantial given that the global mining sector only produces around 850 million ounces annually. The Silver Institute reported that despite a 30% decrease in the deficit last year, it still remained substantial at 184.3 million ounces.
Neumeyer projects for these deficits to continue, driven by increasing industrial consumption.
"We've been in a four-year deficit now, and these deficits are growing. We're talking about a 240 million ounce silver deficit, and that number climbs every year," said Neumeyer.
For why this deficit is not a short-term phenomenon and represents a structural issue, watch the video above.
Why Institutional Investors Are Ignoring Silver
Institutional investors have been notably absent from the silver market, despite its critical importance, Neumeyer pointed out.
Major institutions like the Canadian Pension Plan do not hold significant positions in silver or mining equities, which is surprising given the sector's essential role in the global economy.
"It's really the institutions that are absent from this marketplace. These large institutions that should be supporting this sector for its essential metals are not participating."
This void creates a gap in market support, which is primarily filled by retail investors and smaller entities, Neumeyer described, adding that this lack of institutional support is a missed opportunity.
Could Silver Prices Hit Triple Digits? Neumeyer Weighs In
Keith Neumeyer's long-standing prediction of silver reaching triple digits has often been met with skepticism.
However, with the price of silver hovering around $30 per ounce and the market dynamics showing a persistent deficit, his bold forecast is gaining more traction. At the time of writing, spot silver was trading at $31.52, up 31% year-to-date.
The potential for silver to hit triple digits is not just a speculative dream but is grounded in the metal's essential role in the green energy revolution and other industrial applications, according to Neumeyer.
"I've been criticized for predicting triple-digit silver prices, but now at $30, people are starting to realize it might actually happen. I think we're in another bull market for commodities. Investors should seriously consider this space," he said.
Neumeyer remains bullish on silver, alongside other commodities. For his outlook on copper and uranium, watch the video above.
To explore more about Keith Neumeyer's insights and the ongoing dynamics in the silver market, watch the full interview on Kitco News above.
Coverage of the Rick Rule Symposium 2024 is sponsored by G Mining Ventures (https://gmin.gold/en-US).