The silver price is just a few percentage points away from a 13-year high, with the current spot silver hovering at $32.60 as this article goes to press. Silver prices have not been this high since 2012 – if silver closes out the month of March above $32.50, it will be the highest monthly close since November 2012.
With prices hovering near levels not seen for over a decade, one would logically think that interest in the silver market would be booming. However, this is not the case, and what we see is the exact opposite: interest in the silver market is currently at multi-year lows.
From a contrarian standpoint, this is a good thing, since it means the mainstream western investor is not participating in the silver market currently. When he does, it will signify a warning sign that a top may be approaching. For now, we are nowhere near this point, and we must thus conclude that silver has further room to advance over the months and possibly years ahead.
Let us examine the evidence.
Silver Interest is at Multi-Year Lows
Below we plot the price of silver on top from 2020 through present. Immediately below the price, we plot analytics from Google showing interest in the silver price.
Note that the silver price itself is currently 7% higher than its 2020 peak.
Meanwhile, we can see that interest in this very same silver price has cratered, and is down 75% from the same 2020 peak.
How Can This Be?
How can it be that the silver price is higher than it was five years ago, but interest in silver is down by 75% over that same period?
Simple.
Average investors are attracted to rapidly-moving prices.
Because silver spent the majority of the last four years consolidating, and only just recently broke above its 2020 peak, the average investor has not found reason to become excited by this market yet.
Instead, most mainstream investors are busy chasing the latest cryptocurrency scheme, technology stocks, or meme stocks. They are nowhere near the silver market.
For reference, when was the last time the average investor was interested in silver?
It was late 2020 and early 2021, just after silver nearly tripled in price from $11 to $30 following the Coronavirus pandemic.
In retrospect, this was a terrible time to buy, since the price first moved lower for two years and only just recently broke above its 2020 peak – but mainstream investors do not anticipate very far into the future, and so they generally chase prices which are already moving rapidly higher.
To emphasize: mainstream investors are attracted to rapidly moving prices. Most average investors bought silver in late-2020 or early-2021, attracted to the fast-moving market following the Coronavirus… but they have since abandoned the market, as four years of sideways price action has been too much for them to withstand.
However, silver is now breaking out to new multi-decade highs. This is thus a “stealth” bull market, and a primed setup for a notable move higher once the mainstream investor returns to chase prices.
Silver Miners Confirm Low Interest
As further evidence that interest in the silver market remains low – not out of any fault of silver itself, but rather due to mainstream investor frustration at the lack of rapidly moving prices – below we plot the ratio between the SIL senior silver miners fund in comparison to silver itself.
Some investors prefer to invest in silver miners because, as the price of silver itself climbs, they expect silver miners to show higher profit margins. Silver mining investors tend to be a subset of overall silver investors, those who have a higher tolerance for both upside reward and downside risk.
Remember that silver itself is near a 13 year high. However, because it has been a “stealth” bull market, with little attention or fanfare, the average investor interest is still down 75% from where it was just four years ago. If average investor interest is down by such a drastic amount, we had better believe that interest amongst the subset of silver investors who seek leverage via silver miners will also down.
The result is clear to see: the relative valuation of silver miners compared to the very product these companies mine is at decade lows, and close to levels which have previously corresponded with major bottoms in the sector.
[Note: from the present level, the average silver mining company would need to triple in price, just to get back to its valuation from 2016. However, in 2016 the silver price itself was 50% less than it is today. We thus believe that the average silver miner is undervalued by at least 350% given today’s silver price above $30 per ounce. For investors who have the proper risk tolerance, this may be a once-in-a-lifetime opportunity to capture the reversion higher in valuations in silver miners as silver challenges $35, $40, and eventually $50 per ounce.]
Capturing the Contrarian Mindset
As investors, we should celebrate that the average investor is not yet interested in silver, because this means the sector is still ripe to rise over the years ahead!
If the average investor was already chasing this market, it would be a warning sign that a multi-year top was near, just as happened in late-2020.
Note that the average investor will come back to this sector again – it just may still be some months or years ahead in the future. Mainstream investors are attracted to rising prices, so they may start to enter the silver market once it crosses $35, $40, or even $50 dollars per ounce.
The key is that we want to be positioning now, while silver is still relatively unloved, to capture the upside gain that is to come. If we wait until prices start rapidly moving, we will be chasing the market along with the average investor.
And that is a strategy that is rarely profitable.
Takeaway on Silver
The silver price is approaching a 13-year monthly closing high.
However, because prices have been moving higher slowly over the last year, interest remains subdued.
This “stealth” bull market has caused valuations across the silver mining sector to approach decade lows.
For investors who expect that silver will continue to rise over the years ahead, and in fact may rise more rapidly starting soon, silver mining companies are trading at compelling entry points.
Remember – mainstream investors are not yet participating in the silver market. When they do, prices could skyrocket quickly, as they last did in 2020. You must be positioned before the average person begins to show interest in silver order to fully capture the upside.
At www.iGoldAdvisor.com we publish independent research on the exact silver mining companies that we are investing in, for investors who would like to follow along with our decisions. We also cover gold, the US dollar, bitcoin, and related commodity markets which impact the precious metals. For higher net-worth investors, we offer access to silver private placements, which allow investors to receive free warrants in addition to their silver shares, for greater upside potential.
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