What a predicted silver shortage could mean for investors


With the release of the Silver Institute's Survey 2024 projecting the second-largest worldwide shortage of silver in more than two decades, it's easy to get excited about this commodity.

Looking back, we can draw parallels between the current market dynamics and those of 2010.

As such, I cannot help but wonder if we are poised for a significant déjà vu moment in the silver market? If history does repeat, it's highly likely we will see a monumental move in silver prices, which will offer savvy investors a unique opportunity.

What a predicted silver shortage could mean for investors

Why demand for silver is soaring

What will drive silver to surge? Right now, demand for silver is skyrocketing beyond its traditional uses to emerging technologies including electric vehicles and renewable energy projects.

Much like gold, silver has been used as a safe-haven asset during economic uncertainties and inflationary pressures, I see no reason why this would not continue.

In 2010, a number of factors, including loose monetary policies and geopolitical tensions, catapulted silver prices from around $17 per ounce to a peak of nearly $50 in less than a year, resulting in a gain of almost 200%.

Fast forward to today and you will see the same characteristics in the silver market.

Opportunities for silver investors

If we are on the doorstep of the next major bull market for silver, it's time to look at the opportunities that may present. One stock that I believe stands out as an opportunity is Adriatic Metals.

This Australian-based company is poised to capitalise on the soaring demand for silver, but here's the part that has me excited. From August 2010, its share price rose almost 300% in less than 12 months.

Currently, Adriatic Metals share price indicates that I am not the only one looking at this stock. Price has risen steadily since May 2018 and is now hovering near its all-time high of $4.50.

The stock has a history of rising in line with the silver price, and with demand already strong, a repeat of the silver rally in 2010 could see the price of Adriatic rise strongly. Therefore, I encourage you to watch both the price of silver and Adriatic Metals very closely for the next opportunity.

What are the best and worst-performing sectors this week?

The best-performing sectors include Healthcare, up more than 3% followed by Information Technology and Financials, which are both up more than 2%.

The worst-performing sectors include Energy, down more than 2%, followed by Industrials and Materials, as they are both slightly up more than half of a per cent.

The best-performing stocks in the ASX top 100 include Cleanaway Waste Managements, Block Inc and Lendlease Group, which are all up more than 6%.

The worst-performing stocks include Bellevue Gold, down more than 11%, followed by Brambles down more than 7% and Northern Star, down 4%.

What's next for the Australian stock market?

This week, the buyers have wrestled back control with the market up more than 1% so far this week. Interestingly, the buyers stepped in around the 7800 level, which also happened back in February of this year.

For now, it's clear that there is support from the buyers around 7800, but with the way the market fell last week, don't be too quick to assume that the market will resume the uptrend to make a new all-time high.

That said, we cannot completely discount the possibility of making a new all-time high before April bids us goodbye. We know historically April has been the market's strongest month and is volatile; so, with only three trading days remaining, technically a 3% rise to a new high is possible.  

Regardless of what plays out, we know the market typically makes its mid-year low in the May/June period, so I am still anticipating a move down over the next few weeks.

During a down phase, most stocks are prone to fall and all too often I see traders wrongly assume that all stocks will fall. If you are looking to buy, the trick is to know which sectors to look at to find stocks that have a higher probability of bucking the trend.

Right now, I would encourage you to look to the Healthcare sector, as historically it has shown that it holds up the best when the market is falling. Some notable names to watch include CSL, Cochlear and ResMed.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.