Jeffrey Christian: "Silver price could rise quickly"

Gold has received more attention than silver over the past year, but according to analyst Jeffrey Christian of the CPM Group silver is even more interesting at the moment. He expects the silver price to rise sharply due to increasing demand from the industry. He expects the demand for the precious metal for use in solar panels to increase further.

He also notes that investment demand is currently very low. If that market picks up again, it could have a major impact on the Silver price. Below the video we have the entire interview at Bloomberg unsubscribed for you.

In recent years, silver has lagged behind gold. We saw the ratio go up to 80:1.

Maybe you misquoted me. I'm still a fan of gold and I think I still have a preference for gold for the next few years. But I think silver has been ignored and will catch up in the next two to three years.

So gold is still your preference. But let's look at the scenario for silver. Where do you think the extra demand for this precious metal comes from?

It is interesting to see that the silver price is starting to rise again. The price fell from 2011 to 2015 and then continued to move sideways until the middle of this year. The price is now starting to rise again, but what we see is that it is rising due to increasing investment demand (ETFs). Also, the futures market and industrial demand for silver is picking up.

The demand for Physical Silver Among investors has actually fallen this year, as has the demand for physical gold. But what we see is that prices are rising, even with lower demand for investment silver. In our view, this suggests that once demand for physical silver picks up, we will see a significant increase in price.

You have an insane figure for us, which is that the investment demand for silver in 2012 was almost 200 million troy. This compares to just 21 million troy ounces last year. Investment demand has therefore fallen sharply during this period.

A 90% drop from 2011 to 2018 and probably another 5 to 6 million ounces less this year...

Why is that? Why are people losing interest in silver as an investment?

There are several things going on here. The first is that the price just kept going down. Many investors believed that the price would only continue to rise, while the price of silver peaked in 2011 and has fallen sharply in the years since. I think that's why investors became disillusioned. Silver is not really a financial asset. It really is a schizophrenic metal that is both an investment object and an industrial metal, more so than gold. We are seeing more investment demand in gold because it is really a financial instrument. People have ignored silver. They have been disappointed by the nonsense stories told by silver promoters.

Has there been too much hype in silver?

There has been far too much hype and a diminished ability to distinguish the good from the bad. We do research, we don't do promotion or marketing. Most of the other people who give their views on silver are marketing people and salespeople. Investors are done listening to those stories. The previous discussion about junior gold mining stocks, which is the same as with investment silver.

Let's talk about the industrial demand for silver. It is an important industrial metal, where is the demand coming from at the moment?

It's basically everywhere. Nearly a third is for jewellery and other silver ornaments. Some of it is for quasi investments, some is for religious objects and some is decorative. But you also have a lot of silver in electronics. Due to the large price difference between silver, gold, platinum and palladium, silver is the material of choice for use in electronic devices. We are also seeing strong growth in the solar panel industry, where silver is used. The demand for the precious metal there has risen sharply in the last 12 to 15 years.

And is that going to increase, the demand for silver for solar panels?

It will increase, but the pace is slowing down. You see some substitution towards other metals and a decrease in the amount of silver per product. But the reality is that the solar panel industry and the global demand for solar panels are growing so much that you will also continue to see a growth in the use of silver for solar panels in the coming years.

Let's talk a quick word about palladium. Palladium price is heading towards a record $2,000 per troy ounce. Is there more upside potential?

We believe there is still upside potential and expect the price to peak in the first quarter of 2020. After that, the price will drop again. We see some weakness in the market and we also see substitution to other metals for catalytic converters of cars. We are seeing increasing concerns among some investors as the Palladium price so high compared to platinum.

There are a lot of positions open on the NYMEX. That probably won't increase much further, it's more likely to go down. So we do see more price strength at the beginning of next year, but depending on what happens with the global economy and the demand for cars, we see the price peaking in the first quarter.