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Gold is the ultimate safe haven no investor can afford to ignore... but it's the white metal, silver, that's beautifully poised to deliver, frankly, extreme outperformance over the next several years.
All the hours of precious metals and commodities research I do each month has brought me to one inescapable conclusion: Silver is the most undervalued resource right now.
And you don't have to take my word for it, either; the Silver Institute's 28th Annual World Silver Survey, a global analysis of silver markets, tells the tale in black and white.
I'm going to run you through the highlights and show you the absolute best way to leverage silver's ultra-bullish outlook right now.
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The Silver Shortfall Is Getting Deeper and Deeper
2017 marked the fifth consecutive year of deficit in the world silver market.
Total supply of 991.6 million ounces was unable to keep up with total physical demand of 1,017.6 million ounces. Though a bit smaller than in recent years, the 26 million-ounce shortfall was still significant.
Stockpiles had to be tapped, once again, to make up the difference.
Demand from industrial silver applications grew by an impressive 4% last year, reaching 599 million ounces and accounting for nearly 60% of total physical demand.
2017 marked the first increase in silver industrial fabrication since 2013.
The biggest contributor by far was photovoltaic (solar) panels, which required 19% more silver thanks to a massive, 24% surge in worldwide solar panel installations.
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Industrial applications like brazing alloy and solder silver enjoyed a 4% year-over-year increase to 57.5 million ounces, with China and Japan fueling most of that growth. At the same time, the automotive sector remained robust from a silver demand perspective.
Semiconductor production was the foremost demand driver in the electrical and electronics segments, helping these two segments notch their first silver demand increase, to 243 million ounces, in 2017.
Silver used to produce ethylene oxide (mainly for industrial chemicals) and in photography saw decreases last year, although that latter application seems to be stabilizing.
Silver jewelry demand was up 2% to 209 million ounces with India as the main contributor, as that nation's volumes rose 7% year over year.
As well, the United States showed a strong 12% increase, setting its own all-time demand high.
Silverware's demand increase was a robust 12%, reaching 58.4 million ounces, as India led with a healthy appetite here as well.
Physical investment demand was the one silver subsector that decreased, contributing to an overall physical demand drop of 2% as coin and bar demand fell by 27%.
I'd chalk that up to waning sentiment, as equities gained globally and attracted capital. However, total world demand of exchange-traded products (ETPs) gained by 2.4 million ounces to reach 669.8 million ounces.
Now let's drill down and have a close look at what developments there were on the supply side.
Mined Supply Won't Be Able to Keep Up with Demand
World silver mine supplies dropped 4.1% last year, falling to 852.1 million ounces and marking the second consecutive year of decline - definitely the direction silver investors would like to see.
A number of mine disruptions in the Americas and faltering output at primary silver and gold mines led to 36.5 million fewer ounces.
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Guatemala was the standout "achiever" in the supply shortfall, bringing 15.3 million fewer ounces to market.
Both Peru and China registered small output drops, but Australia and Argentina recorded more significant drops while Mexican output saw a boost in production.
Accounting for credits from by-product metals like gold, lead, and zinc led to a drop in total cash cost plus capital expenditures of $10.54 per ounce, a decrease of 5% over 2016.
So producers have been getting leaner.
Soft silver prices also contributed to weaker scrap supply, which fell to 138.1 million ounces, marking the sixth consecutive year of deterioration.
Asian scrap supplies from industry and consumers were down, while supply was mildly higher in the West, with Europe and the United States leading.
As you can see, with decreasing mine output and robust demand, the fundamental picture for silver could hardly look better.
Investment demand remains the wildcard, of sorts, but here's the thing: Stocks are foundering, as are bonds. Geopolitical tensions, which are a good barometer of where silver will go, remain high. I think, as sentiment softens for equities and debt, it will firm up nicely for silver investing.
That shift could be underway right now, but even if it's not, it can't be long in coming.
So here's my favored way to partake in the upside ahead for the most undervalued resource.
The Best Silver Investment on the Market Right Now
The Global X Silver Miners ETF (NYSE Arca: SIL) is an ideal choice for investors wanting exposure to silver equities.
It's a "one-stop shop" that gives you instant diversification across the biggest silver miners on the planet, with $400 million in assets allocated to over two dozen silver producers. These include Wheaton Precious Metals Corp. (NYSE: WPM), Fresnillo Plc. (LON: FRES), Pan American Silver Corp. (Nasdaq: PAAS), Coeur Mining Inc. (NYSE: CDE), Tahoe Resources Inc. (NYSE: TAHO), SSR Mining Inc. (Nasdaq: SSRM), and Hecla Mining Co. (NYSE: HL).
Holdings are somewhat geographically diverse as well, with 39% allocated to Canada, 18% to Mexico, 13% to Russia, 12% to the United States, 12% to South Korea, and 6% to Peru.
The 2018 World Silver Survey proves it: With supplies remaining challenged and fabrication demand at elevated levels, it won't take that much for revived investment demand to kick silver prices into high gear.
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