The recent major selloffs in silver have given investors an excellent chance to accumulate a long-term position in physical holdings and silver companies. As the price has come down, I have been recommending for some time to dollar cost average and/or pyramid down into silver and silver equities. So what is the path to a surge in silver prices? My primary thesis is that the endless easy money policies from central banks around the globe have created a long-term tailwind for the various precious metals.
Despite the short-term pressure on the metals, the Federal Reserve’s continued accommodative and dovish policies should create a weaker dollar in the long run, inflation, and, in turn, bolster the prices of gold and silver. This thesis rests on silver being treated as a precious metal. Precious metals hold value and increase their buying power when inflation ticks up. While this has yet to occur in the U.S., it will be a likely result of a diluted money supply. While gold is the ultimate hedge against inflation, other precious metals — such as silver, platinum, and palladium — all tend to move higher when inflation creeps up.
Gold has long been considered the best of the precious metals, but as its price has been driven up, retail investors have turned to silver as an alternative precious metal. Unlike gold, the great thing about silver is that there is huge industrial demand, as well. The second key driver that I believe could cause a surge in silver in the next few years off the recent lows is the multiple sources of demand for the metal, in particular technology.