Could the Silver Price Really Hit $130 per Ounce?

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Could the Silver Price Really Hit $130 per Ounce?
Johnny Silver Bear

 

Silver has made significant gains in the past, but has not risen past $20 per ounce since 2016. 

Nonetheless, well-known figure Keith Neumeyer, CEO of First Majestic Silver (TSX:FR,NYSE:AG), believes the white metal could reach the $130 level.

Neumeyer has voiced this opinion many times, recently giving the $130 number in a November 2017 interview with Palisade Research, and again in March 2018 with Kitco. In the past he’s been even more bold, suggesting the white metal could reach $1,000.

In Neumeyer’s opinion, the precious metal is being bolstered by technology, along with other factors. He believes the market needs to return to some “sane-ness,” and that institutions need to “start to recognize the valuations of some of the mining companies and stocks.”

Here’s why he thinks that needs to happen and what he thinks it will take to bring silver up to $130.

Silver in the future: $130 per ounce?

There’s a significant distance for the silver price to go before it reaches the success Neumeyer has boldly predicted. In fact, in order for the precious metal to jump to $130, its value would have to increase by over eight times its current value.

Neumeyer sees $130 silver in the cards in part because he believes the current market compares to the year 2000, when investors were sailing high on the dot-com bubble and the mining sector was down. The First Majestic Silver CEO thinks it’s only a matter of time before the market corrects, like it did in 2001 and 2002, and mining sees a big rebound in pricing. It was during this time that Neumeyer himself invested heavily in mining and came out on top.

He has pointed to repeated gains in the NASDAQ Composite (INDEXNASDAQ:.IXIC) and S&P 500 (INDEXSP:.INX), noting, “billions and billions of dollars are being thrown into these markets, and if the mining sector even got a small percentage of that money it would light up quite dramatically … I think that’s exactly what’s going to happen.”

The First Majestic Silver CEO has also stated that while times have been tough in the mining sector since 2012, many companies have since recovered. He believes investors will see increasing production as cashflow increases and technology infuses the mining sector. Neumeyer also anticipates a steady increase in mining efficiency over the next 10 years, which will be reflected in the value of silver.

Speaking about the current price of silver, Neumyer said it is “a bit of a joke.” He mentioned various other metals that have doubled in price, such as lead, while silver has seen little movement.

Neumeyer believes the white metal should be uncoupled from gold, and should be seen as a strategic metal due to its necessity in many everyday appliances, from computers to electronics to solar panels. He has also stated that silver production has gone down in recent years, meaning that contrary to popular belief the metal is actually a rare commodity.

According to Neumeyer, “we’re consuming, as a human race, over 1 billion ounces of silver annually, and miners are only producing about 800 million ounces a year, and that’s been dropping for three consecutive years.” He has also pointed to declining grades, making the case for a deficit.

Silver in the future: What others say

While the CEO of First Majestic Silver is one of just a few saying silver is poised to reach a triple-digit price, there is support for Neumeyer’s belief that the metal is undervaluedand that “ideal conditions are present for silver prices to rise.” These conditions includelow interest rates, overvalued markets and a monetary system overcome with indebtedness. And many are on board with Neumeyer in the idea that mining has entered a bull market.

So, if the silver price does rise, how high will it go? Let’s look at silver’s recent history. Thehighest price for silver was just under $50 in the 1970s; it came close to that level again in 2011, but has been much lower lately. In 2018, the highest silver has gone is just under $17.60.

In a recent FocusEconomics report, analysts surveyed said they see the white metal averaging $17.80 in 2018, and by Q3 2019, the last quarter for which statistics are given, they believe the average silver price could be as high as $19.20. Overall, it appears as though the general consensus is that silver will increase, but will do so much more marginally than Neumeyer believes unless there is a major catalyst.