A Historic Squeeze and Gold’s Untapped Potential
In a recent interview on Commodity Culture, hosted by Jesse Day, Shawn Khunkhun, CEO of Dolly Varden Silver, shared his expert insights on the current and future state of the silver market. With a focus on the dynamics that could drive silver prices to unprecedented highs, Khunkhun provided a compelling analysis of both the silver and gold markets, offering valuable perspectives for investors.
A Historic Silver Squeeze is Coming:
According to Sean Khunkhun, the silver market is on the cusp of a historic shift. He highlighted that in the last century, silver has predominantly been in a bear market, with only brief bull markets in 1980 and 2011. These bull markets were driven largely by investment demand, which historically comprises about 30% of the silver market during bear markets. However, Khunkhun predicts a dramatic change by the end of 2025, where industrial demand will fully consume mined silver, leading to an unprecedented squeeze.
"The 850 million ounces we mine annually will be entirely consumed by growing industrial demand," Khunkhun stated. He pointed out that recent years have already seen significant silver deficits, and with investment demand expected to surge during the upcoming bull market, the squeeze could lead to record-breaking silver prices by 2026.
Gold at All-Time Highs:
Turning to gold, Khunkhun noted that it has reached new all-time highs in various currencies, yet mainstream attention remains limited. Despite gold’s strong performance, it is not yet front and center in the financial media, partly due to the strength of other asset classes. However, Khunkhun believes that as other asset classes begin to falter, gold will emerge as a key focus for investors.
Drawing a parallel to the 2007-2008 financial crisis, Khunkhun suggested that gold could see a similar rise in relevance as economic conditions shift. He emphasized that while gold has been overshadowed by other investments like Bitcoin and fine art, its long-term value proposition remains strong.
Gold-to-Silver Ratio:
The interview also touched on the gold-to-silver ratio, currently at around 86:1, significantly higher than the historical average of 54:1. Khunkhun expressed confidence that this gap will close, as the current ratio is unsustainable given the fundamental differences between the two metals. He pointed out that silver is consumed and not recycled, unlike gold, which remains in circulation, making silver’s scarcity increasingly critical.
Health of the Silver Mining Sector:
Discussing the silver mining sector, Khunkhun acknowledged that while the sector is undervalued, it presents significant opportunities for investors. He noted that the industry is healthier than ever, with strong production profiles and lean operations. However, he stressed the importance of careful stock picking, recommending that investors focus on management teams with a track record of success.
Key Takeaways:
- Historic Silver Squeeze: Industrial demand will consume all mined silver by the end of 2025, leading to a potential price spike.
- Gold’s Potential: Despite current underperformance in the media, gold is set to gain prominence as other asset classes weaken.
- Gold-to-Silver Ratio: The current high ratio is expected to normalize, favoring silver’s price movement.
- Investment Opportunities: The silver mining sector offers significant value, but investors must choose wisely.
Watch full interview:
Conclusion:
Sean Khunkhun’s insights underscore the importance of paying attention to the evolving dynamics in the silver and gold markets. With industrial demand set to drive a historic silver squeeze and gold poised for increased attention, investors should consider positioning themselves to capitalize on these potential market shifts.
Watch the full interview on Commodity Culture for more in-depth analysis and expert perspectives.