Silver heading for supply deficit – Morgan-Liezel Hill-MiningWeekly

16 01 2011

By: Liezel Hill

28th September 2010

TORONTO ( – Silver is likely heading for a supply deficit in the next decade or so, as demand growth gets a boost from new industrial uses for the metal, as well as increased investor interest, analyst and founder of David Morgan said this weekend.

“I am more bullish over the next ten years than I was over the previous ten years [for silver],” he said in a Sunday presentation at the Cambridge House resource investment conference in Toronto.

Silver prices have touched 30-year highs in recent weeks, and reached $21,60/oz on Monday.

The market for the metal was in a supply deficit from the 1990s until about 2006, but moved into a surplus in the last few years. The VM Group/Fortis Bank report on the metal published in June forecast a 7 200 t surplus for 2010.

Even just based on the outlook for increased industrial demand in ten years’ time, that would work out to a deficit, Morgan said.

“I am suggesting highly that we are going to go into a deficit again,” he stated.

“If you look at the industrial side only you are going to be in a deficit, and if you add any kind of industrial demand on top of that it gets even more bullish.”

Morgan commented that the precious metal is being used more and more in food and water purification, solar technology applications, nanotechnology, textile production, radio frequency identification, medical uses and many others.

Silver and gold prices generally track in the same direction – the historical correlation is about 85% – but silver is more volatile, moving further up and down on a percentage basis than gold.

Silver is also a much smaller market than gold, Morgan commented.

“Remember, a four dollar price move in gold would buy the entire silver market.”

Much of the world’s silver supply is produced as a byproduct from base-metal and other mines.




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