Lear Capital Weighs in on Whether the Remainder of 2023 Holds Promise for the Silver Industry

With strong continued interest in silver expected for the coming months, the precious metal’s price could potentially climb to a level that hasn’t been seen in more than a decade, according to Lear Capital Founder and Chairman Kevin DeMeritt.

“Silver has become a highly in-demand asset — yet the available supply hasn’t vastly increased,” DeMeritt says. “Silver is needed for industrial and clean energy processes, which could help drive its price to more than $30 an ounce this year.”

Wondering what factors could potentially affect silver’s performance during the remainder of the year? A few of the key considerations are listed below.

Currency Production

On the heels of precious metals mining stocks’ generally steady climb since October — and an anticipation that the Federal Reserve may soon print and pour more money into the financial system — some industry analysts have predicted silver could soon reach $30 an ounce.

U.S. currency practices haven’t required paper money to equate to gold or silver reserves in decades. The government stopped letting people redeem bills for gold in the 1930s, and in the 1960s, extended the policy to silver, according to Federal Reserve records.

Without a need to maintain an equivalent amount of gold or silver, paper currency can, in essence, be printed at any time, in any quantity, according to Kevin DeMeritt.

“Prior to 1974 in the United States, we had to back a printed paper dollar with gold or silver — one or the other — and we don’t do that anymore,” the Lear Capital founder says. “[With] every dollar you print, the money that’s already out there becomes worth less and less; that’s what happens over time to paper currency.”

Precious metals like silver and gold, however, are only available in finite amounts, and various elements — such as extraction methods, weather conditions and political unrest — can affect how much of each can be mined and distributed each year.

Any changes to those factors can result in a reduction of the available supply of physical precious metal assets, potentially boosting their value.

“If you add an increase in demand onto that physical supply that’s fairly limited, usually what you’re going to find is prices go up,” Kevin DeMeritt says. “It’s economics 101.”

Sustainability-Based and Industry-Based Usage

Silver plays a chief role in a number of commercial applications.

“The industrial uses are just going through the roof,” Kevin DeMeritt says. “You have batteries that have silver in it, solar that has silver in it; you also have demand from other countries that are looking now past gold and starting to look at silver, as well.”

The metal, which possesses the highest amount of electrical and thermal conductivity, can be found in solar panels. Roughly 100 million ounces are said to be utilized each year as a silver paste within solar cells, which helps direct electrons into either storage or use, according to Lear Capital.

“Because there’s this drive for green energy around the world, solar has grown — and so has the demand for silver,” Kevin DeMeritt explains. “This industrial demand is really pushing up silver prices. I don’t think solar [power use] is going away.”

It’s actually expected to increase further domestically. The U.S. essentially tripled its solar photovoltaic capacity from 2017 and 2022; another 63 gigawatts could be added by the end of next year, marking an 84% rise in U.S. solar capabilities.

The growing need for silver for clean energy and other applications could result in further supply constraints; which, coupled with investor interest in physical precious metal assets, may help volley prices for the precious metal even higher.

“You have the industrial side of the market that’s starting to increase, and then you have the investment side of the market that’s also starting to look very, very good,” Kevin DeMeritt says. “Numerous investors view silver as a hedge against inflation because it has tended to increase in price during periods of high inflation.”

When inflation reached more than 14% in 1980, for example, silver’s price, according to a Lear Capital analysis, grew by an astounding 557%.

The Economy

While inflation — which is currently at about 3% — has subsided a great deal from its 2022 9.1% high point, it remains above the 2.3% monthly average Pew Research Center calculations indicate the U.S. experienced between 1991 and the end of 2019.

The rise in inflation the U.S. has experienced over the past two years likely has contributed to the current demand for silver, and with talk of a recession still buzzing in the media, a number of investors may continue to express an interest in the precious metal, which a number consider to be a safe haven investment.

Although the U.S. has yet to officially enter a recession this year, some economists are still saying it could happen.

In a survey conducted by the National Association for Business Economics in late June and early July, roughly three-quarters of respondents (71%) estimated there’s about a 50% or less chance that one will occur in the next 12 months — a 27% increase from the tally the professional association noted in April, when just 44% of business economists predicted there was a more than 50% chance of a recession.

If one unfolds, it could, Kevin DeMeritt says, prompt investors to stock up on physical silver assets, which have, in the past, been less reactive to economic downturns — and that could help drive silver’s price in an upward direction.

“The last time we had a recession, the price of silver went up about 350% and hit $47 an ounce,” DeMeritt says. “If we know there’s a recession coming, then the investment demand would [theoretically] start to pick up — and we’re starting to see that. Silver will get more headlines throughout next year.”