Why is Neumeyer calling for US$100 silver?

There’s a significant distance for silver to go before it reaches the success Neumeyer has boldly predicted. In fact, in order for the precious metal to jump to the US$100 mark, its price would have to increase from its current value by more than 350 percent.

Neumeyer expects a triple-digit silver price in part because he believes the current market cycle can be compared to the year 2000, when investors were sailing high on the dot-com bubble and the mining sector was down. He thinks it’s only a matter of time before the market corrects, like it did in 2001 and 2002, and commodities see a big rebound in pricing. It was during this time that Neumeyer himself invested heavily in mining stocks and came out on top.

“I’ve been calling for triple-digit silver for a few years now, and I’m more enthused now,” Neumeyer said at an event in January 2020, noting that there are multiple factors behind his reasoning. “But I’m cautiously enthused because, you know, I thought it would have happened sooner than it currently is happening.”

In his August 2022 with Wall Street Silver, he reiterated his support for triple-digit silver and said he’s fortunately not alone in this optimistic view — in fact, he’s been surpassed in that optimism. “I actually saw someone the other day call for US$500 silver,” he said. “I’m not quite sure I’m at the level. Give me US$50 first and we’ll see what happens after that.”

Another factor driving Neumeyer’s position is his belief that the silver market is in a deficit. In a May 2021 interview, when presented with supply-side data from the Silver Institute indicating the biggest surplus in silver market history, Neumeyer was blunt in his skepticism. “I think these numbers are made up,” he said. “I wouldn’t trust them at all.”

He pointed out that subtracting net investments in silver exchange-traded products leaves the market in a deficit, and also questioned the methodology behind the institute’s recycling data given that most recycled silver metal comes from privately owned smelters and refineries that typically don’t make those figures public.

“I’m guessing the mining sector produced something in the order of 800, maybe 825 million ounces in 2022,” Neumeyer said when giving a Q4 2022 overview for his company. “Consumption numbers look like they’re somewhere between 1.2 and 1.4 billion ounces. That’s due to all the great technologies, all the newfangled gadgets that we’re consuming. Electric vehicles, solar panels, windmills, you name it. All these technologies require silver … that’s a pretty big (supply) deficit.”

Neumeyer’s March 2023 triple-digit silver call is a long-term call, and he explained that while he believes gold will break US$3,000 this year, he thinks silver will only reach US$30 in 2023. However, once the gold/silver ratio is that unbalanced, he believes that silver will begin to take off, and it will just need a catalyst.

“It could be Elon Musk taking a position in the silver space,” Neumeyer said. “There’s going to be a catalyst at some time, and headlines in the Wall Street Journal might talk about the silver supply deficit … I don’t know what the catalyst will be, but investors and institutions will wake up to the fundamentals of the metal, and that’s when it will start to move.”

More controversially, Neumeyer is of the opinion that the white metal will eventually become uncoupled from its sister metal gold, and should be seen as a strategic metal due to its necessity in many everyday appliances, from computers to electronics, as well as the technologies mentioned above. He has also stated that silver production has gone down in recent years, meaning that contrary to popular belief, the metal is actually a rare commodity.

What factors affect the silver price?

In order to glean a better understanding of the precious metal’s chances of trading around the US$100 range, it’s important to examine the elements that could push it to that level or pull it further away.

The strength of the US dollar and US Federal Reserve interest rate changes are factors that will continue to affect the precious metal, as are geopolitical issues and supply and demand dynamics. Although Neumeyer believes that the ties that bind silver to gold need to be broken, the reality is that most of the same factors that shape the price of gold also move silver.

For that reason, it’s helpful to look at gold price drivers when trying to understand silver’s price action. Silver is, of course, the more volatile of the two precious metals, but nevertheless it often trades in relative tandem with gold.

Looking first at the Fed and interest rates, it’s useful to understand that higher rates are generally negative for gold and silver, while lower rates tend to be positive. That’s because when rates are higher interest shifts to products that can accrue interest.

When the COVID-19 pandemic hit, the Fed cut rates down to zero from 1 to 1.25 percent. However, rising inflation has led the Fed and other central banks to hike rates, which has negatively impacted gold and silver. In February 2023, the Fed raised rates by just 25 basis points, the smallest hike since March 2022, as Chair Jerome Powell said the process of disinflation has begun. The Fed has continued these small rate hikes since, with the latest coming in May.

While central bank actions are important for gold, and by extension silver, a key price driver lately has been geopolitical uncertainty. The past few years have been filled with major geopolitical events such as tensions between the US and other countries such as North Korea, China and Iran. More recently, the huge economic impact of the COVID-19 pandemic and Russia’s war with Ukraine have been major sources of concern for precious metals investors.

The Russia-Ukraine war is expected to weigh heavily on commodities markets, including precious metals, even after the conflict ends, with many expecting sanctions to remain. Speaking to the Investing News Network (INN) in March 2022, not long after the conflict broke out, Lobo Tiggre, founder and editor of IndependentSpeculator.com, said he believes these sanctions will lead to a “new Iron Curtain,” which will have lasting economic consequences on a global scale.

“It’s not a small thing, and it’s not going away. I mean, except for an unlikely scenario, it seems to me that this is a paradigm shift; it’s a one-way transition,” he said. “And we will be dealing with the costs for many years to come.”

On a separate note, silver’s close ties to gold’s safe-haven status should be beneficial in the long term, and there is also a strong case to made for the metal’s industrial potential. According to CIBC analysts in mid-2021, higher industrial demand from emerging sectors due to factors like the transition to renewable energy will be highly supportive for the metal over the next few years.

Does historic price action support US$100 silver?

While not all silver market watchers anticipate a triple-digit silver price in the near future, there is support for Neumeyer’s belief that the metal is undervalued and that “ideal conditions are present for silver prices to rise.”

Many are on board with Neumeyer in the idea that silver’s prospects are bright, including Peter Krauth of Silver Stock Investor, who believes that “we are very likely going to experience the greatest silver bull market of our generation.”

So, if the silver price does rise, how high will it go?

Let’s look at silver’s recent history. The highest price for silver was just under US$50 in the 1970s, and it came close to that level again in 2011. The commodity’s price uptick came on the back of very strong silver investment demand.

After spending the latter half of the 2010s in the teens, the 2020s have seen silver largely hold above US$20. In August 2020, the price of silver reached nearly US$28.50 before pulling back again, and moved back up near those heights in February 2021. The price of silver saw a 2022 high point of US$26.46 in February, and passed US$26 again in May 2023.

What do other experts think about US$100 silver?

Many experts in the space expect silver to perform strongly in the years to come, but don’t necessarily see it reaching US$100 or more, especially given the current macroeconomic conditions.

Back in February 2022, David Morgan of the Morgan Report told INN he thought there was potential for silver to hit US$50 in the short term, as high levels of stock market volatility could make the white metal more attractive to investors and might drive it up over the US$30 mark. “Once silver gets above US$33 and it stays there for three or four days — or better yet, even two or three weeks — there’s not much holding it back to hit US$50 again,” he said at the time.

However, 2022 didn’t shake out as many expected, and Morgan’s expectations are more muted for 2023. “We’ll have to see what happens,” he said at the end of 2022. “Last time we got near US$30, very close to it, Rostin Behnam of the (Commodity Futures Trading Commission) came out and said they had to tamp down the silver market. What kind of a free market is that?”

From a longer-term lens, Matt Watson, founder of Precious Metals Commodity Management, thinks that over the next decade silver will benefit greatly from increased industrial demand, particularly from the electric vehicle, solar photovoltaic and electronics industries. This increasing demand for the white metal is happening in concert with decreasing mine supply, which has the potential to push the silver price to US$50 — just not in the short term.

“Now, as (silver) starts pushing, like I said, into the mid-2030s and becomes more of an industrial-based metal, then I think you see the likelihood of that 8 percent growing to a 10 to 12 percent type of CAGR,” Watson told INN.

Tiggre agrees with this long-term outlook. “The industrial side of silver is very bullish for silver over years to come, even if the safe-haven demand for gold goes away,” he said in an interview with INN in January 2023. “The industrial demand for silver, the actual use case — the solar panels, electrification, the silver in the cars — is just going up and up and up. So I quite like silver a lot.”

As mentioned, some experts, including Krauth, agree with the triple digit silver hypothesis. In a May 2022 interview with INN, he explained that there are multiple paths silver could take to get to the triple digits.

“As I was doing my research, and this goes back over several years already, I would get to that US$300 forecast for an ultimate high in the silver price in different ways,” he said. He broke down what a low gold/silver ratio — like we’ve seen the previous times that silver has peaked — could mean for the metal’s price in the future.

Why is silver so cheap?

The primary reason that silver is sold at a significant discount to gold is supply and demand.

There is an abundance of silver — according to the US Geological Survey, to date 1,740,000 metric tons (MT) of silver have been discovered, while only 244,000 MT of gold have been found. In terms of output, 26,000 MT of silver were mined in 2022 compared to 3,100 MT for gold. However, looking at these numbers, that puts gold and silver production at about a 1:8.3 ratio, while the price ratio in May was around 1:80 — a huge disparity.

While silver does have both investment and industrial demand, the global focus on gold as an investment vehicle, including countries stockpiling gold, can overshadow silver. Additionally, jewelry alone is a massive force for gold demand.

Is silver really undervalued?

Many experts believe that silver is undervalued compared to fellow currency metal gold. As discussed, their production and price ratios are currently incredibly disparate. While investment demand is higher for gold, silver has seen increasing time in the limelight in recent years, including a 2021 silver squeeze that saw new entrants to the market join in.

Another factor that lends more intrinsic value to silver is that it’s an industrial metal as well as a precious metal. It has applications in technology and batteries — both growing sectors that will drive demand higher.

Silver’s two sides could both be seen last year: Silver demand hit record highs in 2022, according to the Silver Institute, with physical silver investment rising by 22 percent and industrial by 5 percent over 2021.

Is silver better than gold?

There are merits for both metals, especially as part of a well-balanced portfolio. As many analysts point out, silver has been known to outperform its sister metal gold during times of economic prosperity and expansion.

On the other hand, during economic uncertainty silver values are impacted by declines in fabrication demand.

Silver’s duality as a precious and industrial metal also provides price support. As a report from the CPM Group notes, “it can be seen that silver in fact almost always (but not always) out-performs gold during a gold bull market.”

Should I buy silver in 2023?

Investors looking to buy silver in 2023 have a variety of factors to consider, including where the metal’s price will go and when they can get the best deal. Here’s a quick run down of the year so far, and what two experts think could happen.

Silver’s lowest price so far this year came on March 8, when it briefly dropped under US$20. Since that low, silver has performed strongly against a backdrop of economic uncertainty, including the banking crisis, peaking at a year-to-date high of over US$26 in early May. As of the end of May, the silver price was sitting at around US$23.

In the past few years, the metal has had a pattern of testing the US$26 to US$28 level repeatedly, but has yet to convincingly break past there — that happened again in May. Experts who INN spoke with in April and May shared differing outlooks on where the metal is going this year and whether it can break past that price point.

In April, Gareth Soloway said he thinks silver will see a subdued performance this year. While a break above US$30 could be possible, he believes a potential recession will weigh on silver’s industrial demand and thus its price as well.

John Feneck discussed the topic with INN in May, expressing more optimism about a silver breakout. “I think we’re going to get that this year, again within six months. But the big round number to look for is US$30 — when you get to US$30 silver and you break that with some authority, meaning a couple of closes above US$30, it’s go time in silver stocks,” he said.

How to invest in silver?

There are a variety of ways to get into the silver market. For example, investors may choose to put their money into silver-focused stocks by buying shares of companies focused on silver mining and exploration. As a by-product metal, investors can also gain exposure to silver through some gold companies.

There are also silver exchange-traded funds that give broad exposure to silver companies and the metal itself, while more experienced traders may be interested in silver futures. And of course, for those who prefer a more tangible investment, purchasing physical silver bullion in bar and coin form is also an option.