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Silver Price Likely to Keep Surging as Production Deficit Looms Overhead

JP Buntinx
July 29, 2020

During Q2 and Q3 2020, the silver price has seen a significant price. Many people wonder how long this situation will last. A dwindling supply coming out of Latin America certainly has the potential to keep this momentum going a while longer.

Silver Supplies are Drying up

It is interesting to see how the COVID-19 pandemic continues to disrupt the world’s economy, supply chains, and industries. Even precious metals dealers are facing a lot of pressure, primarily because it has become a lot more difficult to obtain silver as of right now. 

To put this into perspective, there is some supply-related trouble brewing in Mexico and Peru. Both regions are home to mining operations making up 40% of the global silver supply. Due to COVID-19, these mines were forced to either shut down or significantly reduce their output. 

Based on recent findings by the Silver Institute, it is very likely that a market deficit will occur for the first time in years. Mining efforts remain disrupted in the area, and there is no real improvement in sight. A long-lasting disruption can certainly fuel demand for silver even more, thus affecting the price in a bullish manner. 

It is expected there is a 13% decline in silver production from Latin America. This will, in turn, trigger a decrease in the yearly global silver supply by as much as 7.2%. Given the industrial use cases for this metal, as well as the current demand from investors, something will have to give. 

Bullish Silver Price News?

As the second wave of COVID-19 sweeps through the world, production of precious metals is likely to take another hit. Even the biggest operations will not be spared this time around. Not all regions are affected equally, however.

Some sources claim that Peru’s silver output should return to normal before the end of 2020. A lot of that outlook will depend on how the coronavirus situation evolves. Until a vaccine is developed, this uneasy situation may remain in place, up to a certain degree. 

Combined with negative interest rates looking to worsen, and ongoing financial uneasy in traditional markets, Q3 2020 will prove to be very interesting. No one really knows if the silver price surge will continue, but that appears to be a plausible scenario right now. Surpassing $25 will be a challenge, but it isn’t impossible.

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