As America enjoyed a long Thanksgiving weekend, something big was happening with silver.
The precious metal jumped higher on Friday, rising almost $4 to around $55 per ounce. A fresh all-time high.
Interestingly, in the middle of this incredible run, the CME futures exchange shut down completely. Apparently it was due to a cooling issue at a data center, but the timing does seem strange.
Many precious metal investors were suspicious that this might be an attempt to cool down overheating silver markets.
We've previously covered rumors of big banks being massively short silver with positions in the multi-billions. It's hard to discern the truth here, but I suspect there is some validity to these rumors.
This is purely speculation. But if some big players were stuck short, and they're powerful enough to shut the COMEX down in an attempt to stop the rally, their mission nonetheless failed.
Because by today silver had shot up another $4, reaching $59, another new high.
The short squeeze is almost certainly playing a role in this bull run, but there are also more concrete fundamental factors at play.
Silver is the best conductor of electricity in the world. Even copper pales in comparison. So when efficiency really matters, silver is the ideal choice.
When it comes to applications like solar panels and electric vehicles, silver is a must-have.
And while both sectors are doing well lately, solar has broken out as a breakthrough source of demand for silver.
A recent article by Reuters summed up silver's solar outlook well:
Industrial demand rose to 689.1 million ounces in 2024 from 644 million the prior year, according to LSEG data.
Of this, 243.7 million ounces was for use in solar panels, up from 191.8 million the prior year and up 158% from the 94.4 million in 2020.
Global solar capacity additions were about 600 gigawatts (GW) in 2024, and are expected to rise to close to 1,000 GW by 2030.
The International Energy Agency expects 4,000 GW of new solar capacity will be installed from 2024 to 2030.
This suggests that solar alone is going to drive silver demand higher by close to 150 million ounces a year by 2030, which would represent an additional 13% on top of the 2024 physical demand of 1.169 billion ounces.
As you can see, solar is already a huge source of demand for silver, and this is only set to continue growing over the coming years. China is deploying vast amounts of new solar capacity, sucking up an increasingly large percentage of new silver supply.
And here in the U.S., solar is proving to be one of the only options to quickly power up new data centers which are popping up like weeds.
From February to September, silver bullion ETFS like SLV and PSLV saw incremental inflows from investors.
But in October, that reversed as we experienced the first significant correction in a while.
Source: Bloomberg
As you can see in the chart above, Bloomberg projected November to be a major bounceback in silver ETF demand. This is a good sign, as we know that just a little additional investment demand, when combined with soaring industrial usage, can cause explosive moves in prices. And we're already starting to see that now.
As the price rises, silver will attract more eyeballs and buyers, feeding a new investment cycle. This should also worsen the short squeeze. Things could get very exciting soon.
Back in April we had the year's first major correction in gold and silver. On April 4th, I wrote a piece titled Bathwater, Baby, and Silver, encouraging readers to buy the dip.
Back then, the gold:silver ratio was a ridiculous 102. Silver was around $29.65, while gold was $3,024.
In the months since, the gold:silver ratio has fallen to 73 ($59 silver vs $4,300 gold). But that is still far above historical norms. The graphic below shows the gold:silver ratio throughout history.
Source: MakeGoldGreat
Back in 2011, the gold:silver ratio dropped as low as 30 ($50 silver vs $1,500 gold). I am confident we'll at least get to that level during this cycle. And possibly even to 20.
If the ratio were to return to 30 at current gold prices, silver would need to reach $143 per ounce.
If gold rises to $6,000 and the ratio returns to 30, silver would reach $200.
So no, I'm not selling any of my silver or miners yet. I believe the bull market in precious metals, especially silver, has a long way to go.
This "debasement trade" as the mainstream media is calling it, is just getting rolling.
It looks like President Trump will appoint a new Federal Reserve Chairman early next year, and that should mean much lower interest rates, and far more money printing.
Unfortunately, another wave of inflation seems inevitable. Silver remains one of the best ways to prepare for it.
The Daily Reckoning