Silver Lining
This month, we are going to look at the confluence of precious metals and energy. Specifically, solar energy
Solar is a central part of the new electrical grid. In 2013, the global solar capacity was about 141 gigawatts. By the end of 2023, there were 1,419 gigawatts installed globally. Analysts expect solar to make up 80% of renewable energy growth over the next five years.
We want exposure to that trend.
We can do that through the metal that goes into every solar panel…silver.
The industry averages about 0.64 ounces of silver per panel. That worked out to be 193.5 million ounces of silver in 2023 and approximately 232 million ounces in 2024. That’s nearly 20% of global silver demand.
But before we get into this story, we need to examine the economic situation. The last time we spoke, we worried that tariffs would shut down global trade. That situation has changed.
Has the Tariff Wave Crested?
Traders and economists are at odds on the impact of tariffs.
Economically, we already see the pinch of tariffs on prices of “stuff.” The Budget Lab at Yale University found that the cumulative effect of the tariffs enacted in the last six months already raised prices by 2.3%.
That will cost Americans an extra $3,800 per year.
Here are some specific impacts so far:
- Clothes – up 17%
- Cars – up 11.4%
- Equipment (machinery and industrial) – up 9.6%
- Baby products – up 20%
- Small appliances (SharkNinja) – up 10%
Retail stores like Walmart and Costco hiked prices on toys, electronics, and groceries. Nike added $5 to $10 on its shoes. Those increases won’t hurt the economy immediately, but they will become a drag.
However, we aren’t seeing that reflected in the markets. Particularly in commodity markets. And initially that’s what happened:
This is a chart of the Commodity Resource Bureau (CRB) Index. It tracks a basket of nineteen commodities including farm products, energy, and metals. It peaked in 2022. Today it is only off about 10% from that high.
That’s not the chart of a world expecting an economic collapse.
Tariffs should slow economic growth…which should be a headwind to commodity prices. That was the response by commodity prices to the major announcement of tariffs in April 2025.
It sent the Reuters/Jefferies Commodity Research Bureau Index down by over 10%.
But many commodities (particularly metals) recovered.
That’s because Wall Street traders leaned into the TACO trade – also known as “Trump Always Chickens Out.” That’s shorthand for the administration’s performance – they announce heavy tariffs and then postpone them. For example, the administration escalated tariffs on China from 10% in April to 115% in May. Then announced a 90 day pause.
It whipsawed the markets and traders took note.
Now they see tariffs as an opportunity to “buy the dip.”
The copper price is another good indicator of economic expectations. Copper goes into everything we buy today. If the world’s business leaders expected economic collapse, copper prices would fall.
As you can see below, that’s not happening:
In contrast, the price of copper hit its all-time high on March 26, 2025, of $5.24 per pound. The red metal continues to sit well above its five-year average price of $3.99 per pound.
In other words, commodity prices no longer warn of impending economic doom.
That’s good because we believe silver is ready to run.
Silver – The “Little Sister” Finally Gets the Spotlight
As any silver bug will tell you, gold gets all the headlines. Silver bugs are speculators that usually lurk around the edges of big conferences. They will flash you a shiny ingot and tell you all the reasons why silver will outperform its yellow cousin.
But silver always had one foot in precious metals and the other in industrial metals. Until the development of digital cameras, silver underpinned the entire photography industry. Once digital surged ahead, silver demand declined. Investors fled and the metal was relegated to the island of misfit investments.
But that is changing.
Precious metals are doing well right now. As we can see from the chart below, the gold price doubled from its recent low price in October 2022.
The price of silver followed suit:
However, silver just began to catch up. That’s a typical story with silver and gold. Gold moves first and then silver explodes.
Silver outperformed gold spectacularly from 2005 to 2012:
We believe the current situation is similar. Going back to January 2022, gold outperformed silver.
That’s the setup we find today:
Silver doesn’t consistently outperform gold over the long run. But as we saw in that 2005 to 2013 period, it is more volatile. It can go up much higher than gold. We measure that volatility using a gold to silver ratio. It measures how many ounces of silver you can buy with an ounce of gold. Historically that value is between forty-seven ounces and sixty-five ounces.
Today, we are at an extreme:
The current value of 92.02 is far above the normal gold to silver ratio. We expect this to change over the next few months. The current gold price is around $3,350 per ounce today.
To put the silver price back at the top of its historic range (65 ounces per ounce of gold), it would be around $51.50 per ounce. It’s currently $36.00 per ounce.
To reach the high end of the range of historic gold to silver ratios (45 ounces per ounce of gold), it would be around $75 per ounce.
And we believe this could happen quickly.
That’s why we want to own the Sprott Silver Miners & Physical Silver ETF (Nasdaq: SLVR).
This $79 million fund holds an excellent basket of physical metal and the best producing silver companies.
Owning a basket of companies is important because we want exposure to the rising price of the metal, not just the company. SLVR gives us security in its diverse holdings and in its exposure to both producers and physical metal.
The fund is brand new in 2025. Shares are up 40% already.
Action to Take: Buy Sprott Silver Miners & Physical Silver ETF (Nasdaq: SLVR) at the market price.
Use a 30% trailing stop on the position. That means if we buy at $30 per share, we will sell if it closed below $21 per share.
We really like silver here. The metal has a tailwind from the commodity side and rising demand.
While we don’t think solar panel demand will drive the price right now, we do see solar’s growth having an impact down the road.
For the Good,
The Mangrove Investor Team
