Market Outlook: The silver market is experiencing a dichotomy between paper prices, which are volatile due to economic signals, and physical demand, which is causing a persistent supply deficit.
Supply Constraints: Silver production peaked in 2016, and current supply cannot meet the growing demand, leading to a significant market deficit.
Physical Demand: There is an insatiable demand for physical silver, driven by industrial needs and consumer purchases of bars and coins, particularly in India and the US.
Industrial Demand: Key sectors such as photovoltaics and electric vehicles are major drivers of silver demand, with expectations that silver may be classified as a critical mineral, affecting future supply strategies.
Investment Perspective: Silver is increasingly being held in IRAs as a long-term asset, with heirs retaining rather than liquidating inherited silver, indicating a shift towards generational investment.
Price Forecast: Experts predict a potential spike in silver prices due to ongoing deficits, with projections suggesting prices could exceed historical highs, possibly reaching $50 or more.
Mining Sector: Silver mining stocks are catching up with the metal's performance, and there is renewed access to capital for exploration, which is crucial for discovering new deposits.
Long-term Strategy: Investors are advised to maintain patience and a long-term view, as the silver market is poised for significant growth despite short-term volatility.
Transcript
[Music] Hey everyone, welcome back. I'm Jeremy Saffron. All right, now the silver market is telling two completely different stories right now. The paper price, according to the latest COMX data, is telling a story of confusion after hitting a 14-year high. Silver futures are pulling back to the $41 mark. Now, this move is being linked to conflicting signals on the US economy and the US dollar momentum. According to the labor department, weekly jobless claims claims rather came in better than expected at 227,000 suggesting strength. Yet that report directly contradicts the latest data from the ADP Research Institute which showed the private sector actually lost 54,000 jobs, a clear sign of weakness. But then we talk about the physical market on the metals and the world of real bars and coins. It's telling a different story of a deep and persistent supply deficit. So, my guest today believes this is the real story. And in an exclusive communication to me, you warned of a potential price shock of $5 to $30. Very quickly, today we investigate that warning. Joining me now is the man who sent that email, former chairman of the Silver Institute and longtime CEO of Hecka Mining, now adviser to San Crystal Mining, Phil Baker, joining us now. Thanks for being here, Phil. Uh, making time just before Beaver Creek. Busy nonetheless. It is. And, uh, thanks for having me on. Yeah, of course. So, I want to start with that email. We were chatting during the summer and it was, you know, a little bit of sideways action on the prices. Obviously, everyone's back to work now in September. Let's start with that recent trip. I mean, you were just on the ground at the Perth Mint in Australia. What did you see there? What's the view on physical demand from one of the world's most important mints? Well, it was pretty remarkable. Um what they said was they've had more demand over the course of the last um five years than they had um have ever experienced in the history of the mint and that they even have trouble getting supply for the uh for from the smelters for producing their their uh coins. So it's a and the commemorative coins was really remarkable to see all of the uh interest that there is in silver. Yeah. Interesting. And and you know, I know that they put out some numbers too and they were reporting that their gold sales were kind of surging. Silver's fell a little bit to an eighth month low in August, but they but I mean, is this just the prices? I mean, what what do you think about this demand on? Yeah. Well, looking at a longer term, right? You know, so month by month things things change and it's uh not necessarily really meaningful for the long term. Yeah. Yeah, because what they've said in the long term is that they've they've had to continue to increase the size of the facility was really quite remarkable. I I hadn't been to the Met in quite a long time and the expansion that they've done of that facility reflects this demand that you have for the precious metals and particularly for silver. That makes sense. And you know during that visit you also were just talking a little bit about there but you discovered that fascinating supply chain link back to your former company heck and San Crystal who you advised. Now how tight is the physical market when you concentrate you know when when concentrate from Americas is needed to satisfy that coin demand on the other side of the world. Well, it just shows you that this demand is insatiable and uh and you particularly see it in really two really the three areas, the three main drivers of silver demand, which are industrial demand. So, you've got to have, you know, the the metal to go into the photovoltaics, you got to have it to go into the uh electric vehicles, you got to have it just for all the silver contacts you have in all the different applications. But then you have this demand for silver for physical and it really comes into two two places. It comes in people buying bars and coins and silverware that that you have in India and I think you know previously we've talked about about silverware and how that is is a market that I really did not appreciate how significant that was in in India. uh it's really more art that they're uh that their people are buying and it's just continuing to grow. Um particularly the the physical demand is is growing and as a result of that you have this big deficit in the in the silver market. This ongoing deficit we're now in the fifth year of that deficit. Yeah. Interesting. Okay. Well, this you know it's kind of on the ground view seems to confirm that data that you and I talked about for months. So, I mean, we had you back on when in July, I think you and I were at Quebec City and and you you stated that the world hit their, you know, the peak silver production back in 2016. Let's talk about the mechanics of that. As someone who runs mine, I mean, just how real is that supply constraint? It's it's very real. Um, silver mines are small. There's they're it's very difficult to have a silver mine that's of size. The the largest silver mines are actually not silver mines at all. They're actually copper mines. Um, you know, it's a 40 million ounces. It comes from the very largest uh mine. It's a copper mine in Poland. But the the if you start going down the table of the largest mines in the world that produce silver, you quickly go from 40 million down to about 15 and then you go from 15 down to uh close to three million ounces in the the top 30 producers. So as a result of that, there's not the ability to scale up silver production. And in fact, if you look at silver production over the course of the last decade, we reached peak silver production in 2016. And it's, you know, we're not going to see that level of production anytime soon. You've got all of the difficulties of putting a mine into production from a regulatory standpoint, from a construction standpoint, and then the fact that the mines themselves are, you know, produce so little silver. Yeah. I'm curious. I mean, you you qualified that the deficit is kind of what was it 800 million ounces over the last four years, last time we talked, why is this deficit more persistent than previous cycles, which you've seen before? I mean, you've you've certainly been through the 2008 crisis. I mean, you ran Heckler during it. Is the supply side of the market fundamentally broken? No. Well, it's it's really the increased in demand that has really been the reason why you have this deficit. What has driven that increase in demand? Number one, it's been industrial demand. So, if you go and you look over the course of the last 25 years, then industrial demand has more than doubled. Um, notwithstanding that photographic demand went to zero. And at the same time, the mines are not able to keep up. You you have um roughly demand of about 1.2 billion ounces and you have supply from the mines of about 800 million ounces. So you've got this deficit of 400 million ounces. Recycling puts in maybe 150 million ounces. So it, you know, puts puts a little bit in that gap, but it doesn't fill the gap. And so as a result, you have this big deficit and it's just going to continue. And it's it's particularly driven by this now it's being driven by this physical demand that you've had over the course of the last four or five years. Yeah. The amount of silver that people are taking in bars and and coins. I want to talk to you about that that one side of the demand too a little bit more. I mean as a former chairman of the silver institute, you've seen the global consumption data more than most. I mean, are the major industrial users like Tesla, like the solar giants, are they behaving in a way that confirms this this deepening shortage? Um, you know, I don't think they're doing that yet, but I think you're going to see that. You know, one one of the things that's been in the news is the critical minerals. Um, silver being a potential critical minerals and the the comment period that uh is available. Um what I think is going to happen is that silver will be considered a critical mineral and and as a result of that um people like Tesla, people that are demanding the silver are going to have to rethink how they they manage that uh that silver. They're they're not going to be as short silver as they have been in the past. They're going to want to make sure that they have access to the to the silver. What does that look like? How are they going to bypass that? I mean, you know, are they going to try and get this direct? Well, it's possible. You certainly see some of that occurring in with some minerals and you could that's certainly possible that could happen with silver, but I think more likely they're just not going to be short. You know, you know, frankly, what they have done up to this point is these industrial players have not had needed to have an inventory of silver. Um, you know, there's been plenty of silver available and there is plenty of silver available. It's just a question at what price people are willing to uh to sell that silver. Yeah, I got to ask you. I mean, I'll present the counterargument, right? I mean, the recent report from the US Federal Reserve, the Beige Book, described economic activity as having little or no change. And I'm I'm just curious. The only reason I bring it up is because the world's largest economy economy is kind of stagnating. Doesn't that logistically lead to a cooling of the global industrial demand, or do you think this is kind of a head fake? No, I you know, it could certainly could. Um, but the long-term trend is not going to change. you know, you're going to continue to to need silver for for all of the industrial applications. We're going to continue to build photovoltaic cells. We're going to continue to make electric vehicles. We're going to continue to have you know computers like this that you know where we're having this conversation that is not going to change and it's going to continue to grow. Um, and particularly in the developing world, as their economies, their lifestyles become more like the Western world's lifestyles, they're going to actually consume more silver. Yeah. I wonder, you know, if I mean, it's pretty interesting that human factor, which seems to kind of defy those traditional economic models. I mean, this whole case about the physical buyer is different that they're really holding here, not selling. I mean, talk to me a little bit about this. Do you think that when when do you think they'll profit take? I mean, do you think that this is a long term? So, so it is very interesting to to look at the physical buyers of bars and coins and the silver institute in August put out a new report on this and and it's a it's a comprehensive report that looks at the last 15 years of uh demand for silver in terms of coins and bars. Interestingly, the US is by far the biggest consumer of bars and coins. Over the course of the last 15 years, it's been about 1.5 billion ounces that um has been consumed. Where does that that silver go? It goes largely into depositories. A a significant portion of it goes into IRA. Interestingly, those IRAs um in the past people would put silver into their IRA and they would be done. They wouldn't um add to it. Now they're adding to it and they're continuously adding to it. And then the second thing that's happened is that frequently when someone would pass and leave to their heirs the their silver, the heirs would sell the silver. And what uh what appears to be happening is those heirs are retaining that that silver. Um so it has become a long-term generational sort of asset that people are are retaining. So that 1.5 billion ounces that have gone in no it's still there. People are not selling those those ounces in any great degree. So So they're using the IRA as to get exposure. What is it just for tax advantage kind of? Yeah. Yeah. IRA is for for non US people an IRA is an individual retirement account and it's a pension product um pension program that the US government has had place for better part of 50 years now. And so and so silver has silver has been allowed to be be in a product that's invested in an IRA. That's so interesting. I mean, if couldn't one argue that if that that that a silver IRA with its reliance on, you know, custodians and deposiitories is just another layer of paper between an investor and their metal. I mean, if the systemic crisis is about to happen, would the IRA holder be better off than holding someone in an ETF? Well, it it but they have the physical and they have a they have the deposit in a vault that that they have assurance that it's it's there. These depositories are very very careful to make sure that each of these these deposits are re are specifically allocated to that particular person. Yeah. What a time, huh? I got to ask you, I mean, you know, the Kicko News audience. I mean, we've been talking about this a long time and they have, our audience has a very long memory. They've seen this movie before, right? They remember the runup in 2011 and again in 2020, 2021. Both times silver looked ready for that historic breakout only to fail and frustrate these investors. Speak directly to them. I mean, what fundamental factors exist today that that wasn't present in those previous failed rallies that makes you believe this time might be different? Look, you haven't had four years of continuous deficits. Number one. Yeah, true. Right. That has that that is a big big difference between where we were in 2011. Um, you know, secondly, the the growing demand that we've had, this 1.2 billion ounces is significantly larger than what we had um back in 2011. Um, and you just have people that are retaining their their silver. Um, which you didn't have at at at that time. It's it is a very different time than 2011. Uh, and you know, interestingly, yes, you've you've seen silver go up, but it's gone up, you know, over the last two years, it's gone up in a similar way. I think uh gold's up about 1.7 times. Silver's up about 1.6 times. So it is it is trending with gold. Uh it's it's it's it's in a very similar place as gold. Interesting. I got to ask you too. I mean let's look at the producers. Silver mining stocks have recently started to outperform the metal. I mean as a former CEO, how do you interpret this move? Is it is it a leading indicator? Are you a little bit worried about how quick it's going? What are your thoughts here? Well, look, I think it's uh it's really a catch-up. If you look at the silver producers, they have not performed the way the gold producers have. So, it's a it's more of a catch-up. It's uh it's very appropriate. I know you're with San Crystal Ball and we can talk a little bit about I'm also curious. I mean, you know, you've had your eye on this market a very long time. Any silver miners, any any juniors? Anything you're looking at right now that our audience is always looking for some takes on what they should be watching? Well, look, I I'm I'm not going to comment on particular companies. uh as a member of the executive committee of the silver institute um I'm not going to I'm not going to go there but but it's a it's a bare a bullish time to be in the industry I sus I s suspect and it's going to and it's going to continue to be and and look I I really would encourage people to take a long-term view um you know I started in this the silver specific industry uh when the price of silver was $410 um so we're you know we're now seeing it 10 times greater. Um, interestingly, if you look at gold, it's gone up about 15 times from its from its low. I think silver will continue to, generally speaking, outperform gold. Um, and get closer to a a gold silver ratio that's probably in the range of 60 to 70. um that seems to be the the place where the market thinks gold and silver should be uh o over o over time and and so it's going to work its way there and that would suggest a you know a silver price that's going to exceed $50 assuming gold continues at the sort of levels that it's at. Yeah, well said. I mean and that's of course and that of course is and that of course is higher than you know the all-time high for for silver and I think it will go even higher than that you know at some point you are going to have this steep increase in the price of price of silver and how high that goes nobody knows but it's going to definitely be um significantly higher than the $50 that we we saw in the past and you know it's interesting when you talk to some of the silver bugs too I mean obviously we've had volatile prices on the gold front and it's been moving very quickly. But if you look at the history, silver has been too. It's just at a lower cost. So I think it kind of confuses people there a little bit. Why didn't it go as much as gold? I mean that kind of leads the most dramatic part of your forecast. I mean you predicted when we talked a few months ago that that jump of 5 to $30 could happen very quickly and it and it did. I mean you know we were sitting around 30 32 for a very long time. We're above 40 on the spot side. But it does sound more like a system failure than a rally. I mean, what's the specific trip wire that forces the paper price to violently surrender to physical reality here? Look, I I there is a relationship that continues between the the paper and the and the physical price. Um it if if you look at, you know, you have things that affect it that affect one that don't doesn't necessarily affect the other as great greatly. you know, for example, the the tariffs, what what was going to happen with the tariffs? You saw a lot of silver having to move from London to to the US. That silver continues to sit primarily in the US. You have significantly less silver than you typically have in the UK. And that of course causes um the the paper market to perform in a little different fashion than it would normally would do. And you also have lots of demand that's coming out of India that's taking supply from the UK and sending it to to uh to India. Um it's remarkable how strong the Indian demand is. We you know we are at all-time highs in rupee terms for silver and yet that demand continues to be insatiable. Interesting. We we talked a little bit about that at the show. I mean on the Indian side because you were just returning from that trip. You showed me some photos. I mean beautiful things there. Is it a matter of still just gold prices being at these levels that that those consumers that don't have the cash are looking towards this metal instead? There's certainly some of that. Um but you do have high netw worth individuals that also want to invest in silver. Um interestingly they maybe invest in silver for a different reason than they invest in gold. In gold it's really a store of value. in silver there's an element of the volatility of silver being attractive to them in order to generate um outsiz returns you know it's an interesting kind of analysis so what did you give me gave me $50 probably higher I mean last time you and I talked you said this could be an interesting world of even $80 silver do you think that that's still a thing yeah no that's certainly possible um you because you're going to have a spike up at at some point and and I'm just not willing to say when that's going to happen, but you will definitely have a spike up and and uh you know the deficit makes that spike going higher than one might expect. Yeah, I was going to ask you I mean you know you you've obviously been around for a m moment. I mean you started focusing on silver in what 2001 when the price was as you told me in June just $410. I mean after all these years what's the single most important lesson that you've learned that you can share with investors listening today? You know I think it's um it's really having patience and staying the course. Um you know there was a lot of uh properties that um went by the wayside in those days and you know people did not do what needed to be done to maintain those those properties. uh and the cost of restarting them is very very very high. Um and what that means is that the silver price has an opportunity to run and run out outstrip maybe where you would expect it to to run. But you got to be patient. Um this is not a uh a game for a really shortterm view uh on on the on the price. It's it takes time, but when it happens, it moves dramatically. And you know, you've seen that just in the last month. Yeah. And from a pure pure macro view, I mean, I got to ask you, I just talking about this this comparable data. We got some jobs numbers over here, ADP over here. I mean, let's talk a little bit about a moment everyone remembers. I mean, you steered Heckler through the 2008 financial crisis. I mean, is the systemic risk that you see in the silver market today comparable to what you saw in the broader broader financial system then? I mean, is is a black swan event in physical metals more likely now than a banking collapse was in '08? No, I don't I I don't think so. Look, the the risk of silver prices going down dramatically is is pretty remote. You know, you've got to have really a an a a a financial crisis that is broad-based. Um you've got to have um uh the in industrial demand, you know, just dissipate. You got to have investors having to liquidate precious metals in order to cover their shortfalls other places. But when I should all of that happen, then of course what happens is the precious metals move in a much more dramatic fashion upwards than anything else. So um the downside risk is seems very very low. Uh you know to me on the minor side I mean are we in a kind of secular move? Do you think this is going to last a long time both for gold and for the uh the silver miners? Yeah, it it you know, look, all of the things that are that cause gold to be attractive, right? You've got um you know, you just had the the the summit with the the Russians, the Chinese, the Indians, and and a bunch of other countries. Um you know, that's troubling. You have the war in Ukraine, you have Gaza, you have tariffs, you have, you know, the things that are happening domestically. You know, all of this is positive for gold and, you know, maybe unfortunately, but it is positive for gold and it's and therefore it's positive for silver. You don't have those things that will drive the the the silver price down in any dramatic way in the same way you have it that will drive prices up. Yeah. Yeah. And then you got, you know, the Fed, you got some of these political actions. I mean, if they they cut and we see, right? I mean, it still seems like there's a pretty bullish case here. Yeah, it it's it's hard to envision, you know, lower prices in a dramatic fashion. Now, having said that, could could the metals prices go down 10 to 20%. I think that's certainly possible. Unlikely. Um, but it's not going to stay there for for long. I got to ask you about San Crystal. I mean, obviously you're advising them right now. Uh they excited about these prices? Absolutely. You know, they um you know, they have a mine that's been in operation for I guess the better part of um 25 years now in Bolivia and uh they're they're continuing to find more metal and continuing to extend the mine life there. and uh and you know they're one of the largest I think they're the seventh largest silver producer and maybe eighth or ninth largest zinc producer as a mine um and uh and so they're they're they're doing quite well and they're you know being very supportive of Bolivia. Yeah. And and and now we see that their concentrates traveling across the world to meet demands in places like Australia too. I wonder how long will this continue for? I mean, you know, we don't have a magic ball here, but and we talked about those prices, but to wrap it up, I mean, are is it a $50 year? It's, you know, the timing of of reaching that sort of level, it's, you know, I'm I'm I'm not going to speculate, but yeah, the fundamentals are there for it to be at that level and higher for years to come. Um it's it and you know and it's been great that it while people view this as a rapid rise it's generally speaking has been you know relatively slow over the course of the last uh sort of 10 years this this measured increase I mean if you if you look at the the metals price it has built a base that is you know certainly above $30. Yeah. and and it's uh you know so so should it fall, it's not going to fall very far and it has the opportunity to go significantly higher. Yeah, and I know we're only a few days into this $40 range, but it's been tight. I mean, it looks like it's got some pretty good support. Uh I appreciate this, Phil. I hope it's a great one over at Beaver Creek going into a conference like that. I mean, you're talking to some of these miners. What are the biggest things now? Are they buying some ounces in the ground or they're they're new, you know, explorers out there trying to find the next play? What's the theme? Yeah, I think the biggest thing is that there's access to capital for the explorers that, you know, you just didn't have a year ago. And um, you know, I think that's going to be the most interesting thing is these guys getting capital, being able to do the basic expiration that needs to be done to find those next deposits. And for silver, it's it's critical because there's been so little expiration that's been done over the last 30 years. So real opportunity to see new deposits, see new mines. Of course, it'll take u you know a decade or more to see mines go into production, but um re real change in the potential um for the the future of the miners uh in silver. Yeah. still a long-term play and and the people that we have on that actually know the industry like you all tell us the same thing so we should be listening uh Phil Baker joining us today truly powerful and datadriven look at the forces kind of at play at this global silver market appreciate your time okay thanks Jeremy thanks Phil appreciate it all right we presented the evidence in the counter arguments now you be the judge is the silver market on the verge of a historic repricing or will the paper market remain in control let us know your verdict and price target in the comments below And of course, if you appreciate this kind of in-depth journalistic analysis, make sure to subscribe to Kitco News and hit the notification button so you never miss an update. I'm Jeremy Sapper. We'll see you next time. [Music] Heat. Heat. [Music]
Silver Price Shock Incoming as 'Insatiable' Physical Demand Drains Supply – Insider
Summary
Transcript
[Music] Hey everyone, welcome back. I'm Jeremy Saffron. All right, now the silver market is telling two completely different stories right now. The paper price, according to the latest COMX data, is telling a story of confusion after hitting a 14-year high. Silver futures are pulling back to the $41 mark. Now, this move is being linked to conflicting signals on the US economy and the US dollar momentum. According to the labor department, weekly jobless claims claims rather came in better than expected at 227,000 suggesting strength. Yet that report directly contradicts the latest data from the ADP Research Institute which showed the private sector actually lost 54,000 jobs, a clear sign of weakness. But then we talk about the physical market on the metals and the world of real bars and coins. It's telling a different story of a deep and persistent supply deficit. So, my guest today believes this is the real story. And in an exclusive communication to me, you warned of a potential price shock of $5 to $30. Very quickly, today we investigate that warning. Joining me now is the man who sent that email, former chairman of the Silver Institute and longtime CEO of Hecka Mining, now adviser to San Crystal Mining, Phil Baker, joining us now. Thanks for being here, Phil. Uh, making time just before Beaver Creek. Busy nonetheless. It is. And, uh, thanks for having me on. Yeah, of course. So, I want to start with that email. We were chatting during the summer and it was, you know, a little bit of sideways action on the prices. Obviously, everyone's back to work now in September. Let's start with that recent trip. I mean, you were just on the ground at the Perth Mint in Australia. What did you see there? What's the view on physical demand from one of the world's most important mints? Well, it was pretty remarkable. Um what they said was they've had more demand over the course of the last um five years than they had um have ever experienced in the history of the mint and that they even have trouble getting supply for the uh for from the smelters for producing their their uh coins. So it's a and the commemorative coins was really remarkable to see all of the uh interest that there is in silver. Yeah. Interesting. And and you know, I know that they put out some numbers too and they were reporting that their gold sales were kind of surging. Silver's fell a little bit to an eighth month low in August, but they but I mean, is this just the prices? I mean, what what do you think about this demand on? Yeah. Well, looking at a longer term, right? You know, so month by month things things change and it's uh not necessarily really meaningful for the long term. Yeah. Yeah, because what they've said in the long term is that they've they've had to continue to increase the size of the facility was really quite remarkable. I I hadn't been to the Met in quite a long time and the expansion that they've done of that facility reflects this demand that you have for the precious metals and particularly for silver. That makes sense. And you know during that visit you also were just talking a little bit about there but you discovered that fascinating supply chain link back to your former company heck and San Crystal who you advised. Now how tight is the physical market when you concentrate you know when when concentrate from Americas is needed to satisfy that coin demand on the other side of the world. Well, it just shows you that this demand is insatiable and uh and you particularly see it in really two really the three areas, the three main drivers of silver demand, which are industrial demand. So, you've got to have, you know, the the metal to go into the photovoltaics, you got to have it to go into the uh electric vehicles, you got to have it just for all the silver contacts you have in all the different applications. But then you have this demand for silver for physical and it really comes into two two places. It comes in people buying bars and coins and silverware that that you have in India and I think you know previously we've talked about about silverware and how that is is a market that I really did not appreciate how significant that was in in India. uh it's really more art that they're uh that their people are buying and it's just continuing to grow. Um particularly the the physical demand is is growing and as a result of that you have this big deficit in the in the silver market. This ongoing deficit we're now in the fifth year of that deficit. Yeah. Interesting. Okay. Well, this you know it's kind of on the ground view seems to confirm that data that you and I talked about for months. So, I mean, we had you back on when in July, I think you and I were at Quebec City and and you you stated that the world hit their, you know, the peak silver production back in 2016. Let's talk about the mechanics of that. As someone who runs mine, I mean, just how real is that supply constraint? It's it's very real. Um, silver mines are small. There's they're it's very difficult to have a silver mine that's of size. The the largest silver mines are actually not silver mines at all. They're actually copper mines. Um, you know, it's a 40 million ounces. It comes from the very largest uh mine. It's a copper mine in Poland. But the the if you start going down the table of the largest mines in the world that produce silver, you quickly go from 40 million down to about 15 and then you go from 15 down to uh close to three million ounces in the the top 30 producers. So as a result of that, there's not the ability to scale up silver production. And in fact, if you look at silver production over the course of the last decade, we reached peak silver production in 2016. And it's, you know, we're not going to see that level of production anytime soon. You've got all of the difficulties of putting a mine into production from a regulatory standpoint, from a construction standpoint, and then the fact that the mines themselves are, you know, produce so little silver. Yeah. I'm curious. I mean, you you qualified that the deficit is kind of what was it 800 million ounces over the last four years, last time we talked, why is this deficit more persistent than previous cycles, which you've seen before? I mean, you've you've certainly been through the 2008 crisis. I mean, you ran Heckler during it. Is the supply side of the market fundamentally broken? No. Well, it's it's really the increased in demand that has really been the reason why you have this deficit. What has driven that increase in demand? Number one, it's been industrial demand. So, if you go and you look over the course of the last 25 years, then industrial demand has more than doubled. Um, notwithstanding that photographic demand went to zero. And at the same time, the mines are not able to keep up. You you have um roughly demand of about 1.2 billion ounces and you have supply from the mines of about 800 million ounces. So you've got this deficit of 400 million ounces. Recycling puts in maybe 150 million ounces. So it, you know, puts puts a little bit in that gap, but it doesn't fill the gap. And so as a result, you have this big deficit and it's just going to continue. And it's it's particularly driven by this now it's being driven by this physical demand that you've had over the course of the last four or five years. Yeah. The amount of silver that people are taking in bars and and coins. I want to talk to you about that that one side of the demand too a little bit more. I mean as a former chairman of the silver institute, you've seen the global consumption data more than most. I mean, are the major industrial users like Tesla, like the solar giants, are they behaving in a way that confirms this this deepening shortage? Um, you know, I don't think they're doing that yet, but I think you're going to see that. You know, one one of the things that's been in the news is the critical minerals. Um, silver being a potential critical minerals and the the comment period that uh is available. Um what I think is going to happen is that silver will be considered a critical mineral and and as a result of that um people like Tesla, people that are demanding the silver are going to have to rethink how they they manage that uh that silver. They're they're not going to be as short silver as they have been in the past. They're going to want to make sure that they have access to the to the silver. What does that look like? How are they going to bypass that? I mean, you know, are they going to try and get this direct? Well, it's possible. You certainly see some of that occurring in with some minerals and you could that's certainly possible that could happen with silver, but I think more likely they're just not going to be short. You know, you know, frankly, what they have done up to this point is these industrial players have not had needed to have an inventory of silver. Um, you know, there's been plenty of silver available and there is plenty of silver available. It's just a question at what price people are willing to uh to sell that silver. Yeah, I got to ask you. I mean, I'll present the counterargument, right? I mean, the recent report from the US Federal Reserve, the Beige Book, described economic activity as having little or no change. And I'm I'm just curious. The only reason I bring it up is because the world's largest economy economy is kind of stagnating. Doesn't that logistically lead to a cooling of the global industrial demand, or do you think this is kind of a head fake? No, I you know, it could certainly could. Um, but the long-term trend is not going to change. you know, you're going to continue to to need silver for for all of the industrial applications. We're going to continue to build photovoltaic cells. We're going to continue to make electric vehicles. We're going to continue to have you know computers like this that you know where we're having this conversation that is not going to change and it's going to continue to grow. Um, and particularly in the developing world, as their economies, their lifestyles become more like the Western world's lifestyles, they're going to actually consume more silver. Yeah. I wonder, you know, if I mean, it's pretty interesting that human factor, which seems to kind of defy those traditional economic models. I mean, this whole case about the physical buyer is different that they're really holding here, not selling. I mean, talk to me a little bit about this. Do you think that when when do you think they'll profit take? I mean, do you think that this is a long term? So, so it is very interesting to to look at the physical buyers of bars and coins and the silver institute in August put out a new report on this and and it's a it's a comprehensive report that looks at the last 15 years of uh demand for silver in terms of coins and bars. Interestingly, the US is by far the biggest consumer of bars and coins. Over the course of the last 15 years, it's been about 1.5 billion ounces that um has been consumed. Where does that that silver go? It goes largely into depositories. A a significant portion of it goes into IRA. Interestingly, those IRAs um in the past people would put silver into their IRA and they would be done. They wouldn't um add to it. Now they're adding to it and they're continuously adding to it. And then the second thing that's happened is that frequently when someone would pass and leave to their heirs the their silver, the heirs would sell the silver. And what uh what appears to be happening is those heirs are retaining that that silver. Um so it has become a long-term generational sort of asset that people are are retaining. So that 1.5 billion ounces that have gone in no it's still there. People are not selling those those ounces in any great degree. So So they're using the IRA as to get exposure. What is it just for tax advantage kind of? Yeah. Yeah. IRA is for for non US people an IRA is an individual retirement account and it's a pension product um pension program that the US government has had place for better part of 50 years now. And so and so silver has silver has been allowed to be be in a product that's invested in an IRA. That's so interesting. I mean, if couldn't one argue that if that that that a silver IRA with its reliance on, you know, custodians and deposiitories is just another layer of paper between an investor and their metal. I mean, if the systemic crisis is about to happen, would the IRA holder be better off than holding someone in an ETF? Well, it it but they have the physical and they have a they have the deposit in a vault that that they have assurance that it's it's there. These depositories are very very careful to make sure that each of these these deposits are re are specifically allocated to that particular person. Yeah. What a time, huh? I got to ask you, I mean, you know, the Kicko News audience. I mean, we've been talking about this a long time and they have, our audience has a very long memory. They've seen this movie before, right? They remember the runup in 2011 and again in 2020, 2021. Both times silver looked ready for that historic breakout only to fail and frustrate these investors. Speak directly to them. I mean, what fundamental factors exist today that that wasn't present in those previous failed rallies that makes you believe this time might be different? Look, you haven't had four years of continuous deficits. Number one. Yeah, true. Right. That has that that is a big big difference between where we were in 2011. Um, you know, secondly, the the growing demand that we've had, this 1.2 billion ounces is significantly larger than what we had um back in 2011. Um, and you just have people that are retaining their their silver. Um, which you didn't have at at at that time. It's it is a very different time than 2011. Uh, and you know, interestingly, yes, you've you've seen silver go up, but it's gone up, you know, over the last two years, it's gone up in a similar way. I think uh gold's up about 1.7 times. Silver's up about 1.6 times. So it is it is trending with gold. Uh it's it's it's it's in a very similar place as gold. Interesting. I got to ask you too. I mean let's look at the producers. Silver mining stocks have recently started to outperform the metal. I mean as a former CEO, how do you interpret this move? Is it is it a leading indicator? Are you a little bit worried about how quick it's going? What are your thoughts here? Well, look, I think it's uh it's really a catch-up. If you look at the silver producers, they have not performed the way the gold producers have. So, it's a it's more of a catch-up. It's uh it's very appropriate. I know you're with San Crystal Ball and we can talk a little bit about I'm also curious. I mean, you know, you've had your eye on this market a very long time. Any silver miners, any any juniors? Anything you're looking at right now that our audience is always looking for some takes on what they should be watching? Well, look, I I'm I'm not going to comment on particular companies. uh as a member of the executive committee of the silver institute um I'm not going to I'm not going to go there but but it's a it's a bare a bullish time to be in the industry I sus I s suspect and it's going to and it's going to continue to be and and look I I really would encourage people to take a long-term view um you know I started in this the silver specific industry uh when the price of silver was $410 um so we're you know we're now seeing it 10 times greater. Um, interestingly, if you look at gold, it's gone up about 15 times from its from its low. I think silver will continue to, generally speaking, outperform gold. Um, and get closer to a a gold silver ratio that's probably in the range of 60 to 70. um that seems to be the the place where the market thinks gold and silver should be uh o over o over time and and so it's going to work its way there and that would suggest a you know a silver price that's going to exceed $50 assuming gold continues at the sort of levels that it's at. Yeah, well said. I mean and that's of course and that of course is and that of course is higher than you know the all-time high for for silver and I think it will go even higher than that you know at some point you are going to have this steep increase in the price of price of silver and how high that goes nobody knows but it's going to definitely be um significantly higher than the $50 that we we saw in the past and you know it's interesting when you talk to some of the silver bugs too I mean obviously we've had volatile prices on the gold front and it's been moving very quickly. But if you look at the history, silver has been too. It's just at a lower cost. So I think it kind of confuses people there a little bit. Why didn't it go as much as gold? I mean that kind of leads the most dramatic part of your forecast. I mean you predicted when we talked a few months ago that that jump of 5 to $30 could happen very quickly and it and it did. I mean you know we were sitting around 30 32 for a very long time. We're above 40 on the spot side. But it does sound more like a system failure than a rally. I mean, what's the specific trip wire that forces the paper price to violently surrender to physical reality here? Look, I I there is a relationship that continues between the the paper and the and the physical price. Um it if if you look at, you know, you have things that affect it that affect one that don't doesn't necessarily affect the other as great greatly. you know, for example, the the tariffs, what what was going to happen with the tariffs? You saw a lot of silver having to move from London to to the US. That silver continues to sit primarily in the US. You have significantly less silver than you typically have in the UK. And that of course causes um the the paper market to perform in a little different fashion than it would normally would do. And you also have lots of demand that's coming out of India that's taking supply from the UK and sending it to to uh to India. Um it's remarkable how strong the Indian demand is. We you know we are at all-time highs in rupee terms for silver and yet that demand continues to be insatiable. Interesting. We we talked a little bit about that at the show. I mean on the Indian side because you were just returning from that trip. You showed me some photos. I mean beautiful things there. Is it a matter of still just gold prices being at these levels that that those consumers that don't have the cash are looking towards this metal instead? There's certainly some of that. Um but you do have high netw worth individuals that also want to invest in silver. Um interestingly they maybe invest in silver for a different reason than they invest in gold. In gold it's really a store of value. in silver there's an element of the volatility of silver being attractive to them in order to generate um outsiz returns you know it's an interesting kind of analysis so what did you give me gave me $50 probably higher I mean last time you and I talked you said this could be an interesting world of even $80 silver do you think that that's still a thing yeah no that's certainly possible um you because you're going to have a spike up at at some point and and I'm just not willing to say when that's going to happen, but you will definitely have a spike up and and uh you know the deficit makes that spike going higher than one might expect. Yeah, I was going to ask you I mean you know you you've obviously been around for a m moment. I mean you started focusing on silver in what 2001 when the price was as you told me in June just $410. I mean after all these years what's the single most important lesson that you've learned that you can share with investors listening today? You know I think it's um it's really having patience and staying the course. Um you know there was a lot of uh properties that um went by the wayside in those days and you know people did not do what needed to be done to maintain those those properties. uh and the cost of restarting them is very very very high. Um and what that means is that the silver price has an opportunity to run and run out outstrip maybe where you would expect it to to run. But you got to be patient. Um this is not a uh a game for a really shortterm view uh on on the on the price. It's it takes time, but when it happens, it moves dramatically. And you know, you've seen that just in the last month. Yeah. And from a pure pure macro view, I mean, I got to ask you, I just talking about this this comparable data. We got some jobs numbers over here, ADP over here. I mean, let's talk a little bit about a moment everyone remembers. I mean, you steered Heckler through the 2008 financial crisis. I mean, is the systemic risk that you see in the silver market today comparable to what you saw in the broader broader financial system then? I mean, is is a black swan event in physical metals more likely now than a banking collapse was in '08? No, I don't I I don't think so. Look, the the risk of silver prices going down dramatically is is pretty remote. You know, you've got to have really a an a a a financial crisis that is broad-based. Um you've got to have um uh the in industrial demand, you know, just dissipate. You got to have investors having to liquidate precious metals in order to cover their shortfalls other places. But when I should all of that happen, then of course what happens is the precious metals move in a much more dramatic fashion upwards than anything else. So um the downside risk is seems very very low. Uh you know to me on the minor side I mean are we in a kind of secular move? Do you think this is going to last a long time both for gold and for the uh the silver miners? Yeah, it it you know, look, all of the things that are that cause gold to be attractive, right? You've got um you know, you just had the the the summit with the the Russians, the Chinese, the Indians, and and a bunch of other countries. Um you know, that's troubling. You have the war in Ukraine, you have Gaza, you have tariffs, you have, you know, the things that are happening domestically. You know, all of this is positive for gold and, you know, maybe unfortunately, but it is positive for gold and it's and therefore it's positive for silver. You don't have those things that will drive the the the silver price down in any dramatic way in the same way you have it that will drive prices up. Yeah. Yeah. And then you got, you know, the Fed, you got some of these political actions. I mean, if they they cut and we see, right? I mean, it still seems like there's a pretty bullish case here. Yeah, it it's it's hard to envision, you know, lower prices in a dramatic fashion. Now, having said that, could could the metals prices go down 10 to 20%. I think that's certainly possible. Unlikely. Um, but it's not going to stay there for for long. I got to ask you about San Crystal. I mean, obviously you're advising them right now. Uh they excited about these prices? Absolutely. You know, they um you know, they have a mine that's been in operation for I guess the better part of um 25 years now in Bolivia and uh they're they're continuing to find more metal and continuing to extend the mine life there. and uh and you know they're one of the largest I think they're the seventh largest silver producer and maybe eighth or ninth largest zinc producer as a mine um and uh and so they're they're they're doing quite well and they're you know being very supportive of Bolivia. Yeah. And and and now we see that their concentrates traveling across the world to meet demands in places like Australia too. I wonder how long will this continue for? I mean, you know, we don't have a magic ball here, but and we talked about those prices, but to wrap it up, I mean, are is it a $50 year? It's, you know, the timing of of reaching that sort of level, it's, you know, I'm I'm I'm not going to speculate, but yeah, the fundamentals are there for it to be at that level and higher for years to come. Um it's it and you know and it's been great that it while people view this as a rapid rise it's generally speaking has been you know relatively slow over the course of the last uh sort of 10 years this this measured increase I mean if you if you look at the the metals price it has built a base that is you know certainly above $30. Yeah. and and it's uh you know so so should it fall, it's not going to fall very far and it has the opportunity to go significantly higher. Yeah, and I know we're only a few days into this $40 range, but it's been tight. I mean, it looks like it's got some pretty good support. Uh I appreciate this, Phil. I hope it's a great one over at Beaver Creek going into a conference like that. I mean, you're talking to some of these miners. What are the biggest things now? Are they buying some ounces in the ground or they're they're new, you know, explorers out there trying to find the next play? What's the theme? Yeah, I think the biggest thing is that there's access to capital for the explorers that, you know, you just didn't have a year ago. And um, you know, I think that's going to be the most interesting thing is these guys getting capital, being able to do the basic expiration that needs to be done to find those next deposits. And for silver, it's it's critical because there's been so little expiration that's been done over the last 30 years. So real opportunity to see new deposits, see new mines. Of course, it'll take u you know a decade or more to see mines go into production, but um re real change in the potential um for the the future of the miners uh in silver. Yeah. still a long-term play and and the people that we have on that actually know the industry like you all tell us the same thing so we should be listening uh Phil Baker joining us today truly powerful and datadriven look at the forces kind of at play at this global silver market appreciate your time okay thanks Jeremy thanks Phil appreciate it all right we presented the evidence in the counter arguments now you be the judge is the silver market on the verge of a historic repricing or will the paper market remain in control let us know your verdict and price target in the comments below And of course, if you appreciate this kind of in-depth journalistic analysis, make sure to subscribe to Kitco News and hit the notification button so you never miss an update. I'm Jeremy Sapper. We'll see you next time. [Music] Heat. Heat. [Music]