Gold hit an all-time high today of $2,906 an ounce. Silver hit $33.21 an ounce. This isn’t an all-time high for silver, but it has broken out of its short-term consolidation pattern. If it can break $34.83, we should be off to the races.
The dollar index is down a bit to $107 from its recent highs of $110. Oil has also dropped to $71.11 for a barrel of WTI.
There are plenty of reasons to be bullish on silver. First off demand is outpacing supply. The Silver Institute projects record silver offtake this year with demand hitting around 1.20 billion ounces.
Supply is expected to grow a modest 3% but that won’t be enough to cover the world's appetite for the shiny metal. There is expected to be a 149 million-ounce deficit. The gap will shrink from last year's 19% level but it will remain large.
The only way to meet demand will be by selling silver that has already been mined and is being stored. This will drive silver prices and miner’s share prices higher.
Industrial demand is expected to take up most of the silver while jewelry and silverware demand shrinks. Industrial demand hit a record last year and is expected to grow another 3% this year. The solar sector will be a large driver. New long-lasting batteries will also need a lot of silver.
Samsung has developed a 600-mile electric car battery that charges in 9 minutes and has a 20-year life span. It uses up to 1kg of silver per car. If 20% of the global car fleet adopted this technology it would use up 60% of all silver produced annually. Toyota will begin mass-producing these batteries in 2027.
Silver is also an AI play. The metal is used in circuit boards, semiconductors, and connectors. It is vital in reducing electrical resistance and enhancing speed. The large data centers have cooling systems that use silver in heat-dissipation and high-speed connections.
Another catalyst is the gold-to-silver ratio. Historically, it would cost you about fifty ounces of silver to buy an ounce of gold. In 2011, this ratio dropped to 31, in 2021 it spiked to 125. It’s at 88 today — the top of the range.
Furthermore, when silver snaps back to its historical mean, it does so quickly, as we saw in 2009 when it jumped from $10 to $50 in just a few years. I own a lot of silver. It is my largest portfolio allocation.
Pot Stocks
In other news, pot stocks saw some life today. Aurora Cannabis Inc (ACB) was up around 50% today alone and the rest of the sector rose in sympathy (Canopy Growth (CGC) was up 21%).
As you know once the bubble popped a few years ago the cannabis industry has been dead. It was overhyped and oversaturated and in the end, pot is just another commodity like corn or soybeans.
That said, Aurora came out today and said they actually made money.
From Yahoo!Finance:
“Driven primarily by its global medical cannabis division, which saw revenue surge 51% YoY to $68.1 million, the firm reported total net revenue of $88.2 million, a 37% year-over-year increase. Strong sales in Australia, Germany, Poland, and the United Kingdom drove international medical cannabis revenue up 112%, accounting for 60% of the company's total medical cannabis revenue.
Reflecting a 342% YoY increase, Aurora also reported record net income of $31.2 million and record adjusted EBITDA of $23.1 million, up 316%. The company generated positive free cash flow of $27.4 million, meeting a key profitability milestone.”
Five years ago Aurora was selling for $200 a share. Today, after the jump you can pick them up for $5.42. They have a market cap of $300 million.
Pot stocks have been so dead for so long any company showing any bit of life could launch. It might be worth poking some bodies and see if they can still fog a mirror.
All the best,
Christian DeHaemer
Outsider Club
Most folks don’t know it…
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Brit Doubles Your Money:
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Late Innings? It’s a Double Header:
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