Is the Silver Spike Over?

Investors place their bets as silver futures open higher today than in the past five years.

Those invested in silver and silver futures are happy to see recent gains, but is the climb about to transform into a slide?

Historically, silver hits a glass ceiling at about $30 an ounce, but this may be changing.

Oil and Gas companies are diversifying energy production. The shift to incorporate renewables serves as a wake-up call to all investors.

Diversify, Diversify, Diversify.

Silver paste is a component of solar panels. The conductive nature of silver makes it a perfect choice for transferring the energy produced in the solar cells to attached cables. The cables, usually made of copper, are connected to battery banks made of nickel.

Nickel and copper are also conductive metals. In recent years their unit prices have risen. That $30 glass ceiling makes silver more appealing to large-scale manufacturers than nickel and copper, at this time.

Up to this point, the silver in new solar manufacturing was gathered through recycling, but the demand for silver is outstripping the recycled silver supply.

Mining will make up the difference. As we discussed in “Vintage Gold or New Gold?” scarcity and technology have changed the way we mine for precious metals.

Extracting pure silver requires a great deal of processing. Mining companies extract small amounts of silver mixed with other metals in a morass of ore and rock.

Mining Companies rarely engage in direct silver mining because silver is a by-product of uranium, gold, copper, lead, and zinc mines.

There are about 300 silver pit mines in operation worldwide. Workers add mercury to mined ore and heat it to melt away the rock. The mercury bonds to the silver and other metals, forming a soft putty. That putty is called amalgam. Then, the workers heat the amalgam until the mercury evaporates and only the desirable metals remain.

Mercury is a hazardous waste and a neurological toxin when absorbed through the skin or breathed. The PPE required to keep workers safe adds to the cost of silver mining.

With silver demand outstripping recycled silver supply, the price per ounce is set to climb. How high will silver go? Only time will tell.

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Disclaimer: Pendant and Ring is not an investment firm. Consult your financial advisor about investing.