February 7, 2025 – In this engaging discussion, Dave Morgan and Financial Sense Newshour’s Jim Puplava explore silver’s undervalued status despite soaring industrial demand and persistent deficits. He reveals the hidden dynamics, from byproduct mining to algorithmic price suppression, that keep silver prices low. Morgan highlights the metal’s critical role in technology and the green transition, warning of potential market squeezes as above-ground stockpiles dwindle. With insights into retail trends, mining challenges, and global economic pressures, he predicts significant price shifts ahead. Curious about silver’s future and investment opportunities? Dive into the full conversation for expert analysis and Morgan’s bold forecasts that could redefine your portfolio strategy.
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Transcript
Jim Puplava:
Well, everybody’s excited about what may happen in the stock market this year. But going unnoticed is what’s happening in precious metals. Silver prices are up 11% since January, and gold is up 8%. And they’re talking about higher prices. Where is all this heading? Joining me on the program is Dave Morgan from the Morgan Report. Dave, we were talking on the air just before we went on, and if you go back to, let’s say, 1980, gold hit $800 an ounce, silver hit $50. Fast forward 45 years later, gold is almost at $2900, silver’s at $33. Copper has gone up, lead’s gone up, iron ore has gone up, aluminum has gone up, the base metals have gone up. Why has silver lagged the other metals?
Dave Morgan:
Well, there are two reasons that kind of work together. One is that early on, way back in the era when Kodak was in the Silver Users Association, there was a consortium named the Silver Users Association. And the mandate for that were the big silver users, like at the time, Kodak, 3M, Tiffany’s. And their edict was basically to keep the price of silver at a reasonable range. That would allow them to have a steady input, knowing the cost, and then they could get through cost of goods sold and they know, you know, what the profit margin would be. That’s one. But the subset of that is that 70% of the silver market, as most anyone who has ever listened to Financial Sense NewsHour, or any of your shows on silver knows, roughly 70% comes as a byproduct of mining. And because your big mining houses like BHP, Broken Hill Properties, RTZ, these huge conglomerate multinational miners, produce a great deal of the silver on a percentage basis, it really doesn’t affect their bottom line very much. And so what happens is these vast amounts of silver, again, 70% basically, is taken as a credit to the bottom line. So whatever the price of silver is, in most cases, these companies really don’t give a fig what the price of silver is. They mine this much, it’s times this price, they multiply it, and they take that as a credit against their copper mining or lead, zinc, or iron ore, or whatever it is. And so that’s a detriment to the market. I mean, if you had an automobile, if you were not a dealer, and 70% of your inventory, you didn’t care what the price was, or you sold it at wholesale, you know, you wouldn’t be in business very long. You’re only making profit on 30% of your inventory. But that’s the silver story. Coming back around to the Silver Users Association, what actually took place is that if you look at both gold and silver, but silver in particular, what you’ll find is that the price of silver in US dollar terms, in most currency terms, is almost exactly what the cost of production is. So the reason we’re getting $33 silver now is all-in sustaining costs plus taxes and a few little incidentals that are not really taken into the AISC as it’s calculated by analysts is around $28. So we have, for a very long time, produced silver basically for the cost of mining it, which doesn’t really give enough margin for a major silver miner to reinvest the money they need for new exploration, capital equipment, and all that goes with it. I don’t want to dive too deep, but there’s a white paper on the Morgan Report for our members called Archie’s Rule. And what he proves in that paper is that to be a very good mine, you need to have a 2x. So if silver’s production cost is $30, you need to be mining at $60 to be really profitable. And it applies to gold, it applies to iron ore, it applies to all the metals. And it sounds outrageous, but when you take into the long curve, if you do an integration over a 10 or 20-year mine life, you’ll find that number is a pretty accurate number. So I’ve overspoken it, Jim, but that’s it. 70% they don’t care. Silver Users Association, I guess the last one I’ll say and re-emphasize a bit, is psychology. I mean, right now I get hammered on Twitter all the time. “Silver’s not money. Silver’s not money. Silver’s not money.” Well, it really is, but it isn’t money in the official sense. It was demonetized, as we all know, a long, long time ago. But if the bankers ever took silver as a monetary asset, it would have to come back to the monetary ratio which would be, you know, 16 to 1, 10 to 1. So if you have $2900 gold, a 10 to 1 ratio gives you $290 silver. Now, probably have some usefulness as money, but, but since it’s so undervalued and only at the marginal cost, it’s really not that significant. Doesn’t mean that we’re not going to see much higher prices because of what we’re going to talk about here in the near future.
Jim Puplava:
Well, that brings me to the next point. Silver is running about a 200 million ounce deficit each year, four years in a row that they’ve run deficits. Looks like we’ll be running a deficit this year. The other aspect, Dave, you cannot have electronics, you can’t have technology, and you can’t have green without silver. So silver is 70% of the demand for silver is now industrial demand. And let’s say the other part is monetary demand. How can you continue to run silver deficits like this? And then you have some of the silver producers who are getting down to their lower grades, so it’s going to be costing more to mine because the grades are lower. How can this continue?
Dave Morgan:
Well, it can indefinitely, as you implied. If you’re making a very small margin, you’re not going to stay in business forever. And what will happen, at least what’s happened in the past, is we do see an increase in price, but it’s a marginal increase. It’s just going to be cost. If production goes to let’s say $35 an ounce, you’ll see silver, you know, $36, $37 probably, but you’re not going to see it at $90, although you could. I want to back up on that statement a little bit. So, basically running a deficit like we are encountering is going to at some point really cause the price of silver to go higher. Now, unfortunately, and I say unfortunately due to my experience in the silver market, these are usually spike highs. It’s like silver makes up for all the suppression, all the negative talk, all the overlooking, non-use in financial planning, all those things, and it kind of catches up and usually does it in such a rapid hurry that you need to cash out part of it, all of it. You have to look at it hard. Unfortunately, it just doesn’t remain steady once it achieves a high price. Although this time it could be different, and I’ll explain that. But go back to the $50 price for silver. I’ve mitigated that somewhat, Jim. I mean, it’s true it did peak at that price, but that was a one-day event. But even if you took the price going into that $50 and you looked at it like $25 or $30, we could still be using John Williams’ Shadow Stats numbers, you know, be in like the $150 range. If you just use the CPI that the government uses, you’d still be up in the like $60 to $70 range after checking their calculator again, but far higher than we are now. So it just doesn’t make any sense other than the idea that you know, it’s really not cared about. Coming back, I wrote an article about silver being the greatest technology investment you can make. And I did that back when Cisco was making new highs every day. You’re old enough to remember those days. And I wrote that article and actually, Jim Cook and Ted Butler wrote for Jim for 20 plus years, and they kind of picked up another article and kind of rewrote it. But it’s true, as you said, I’m just backing up. And it’s really probably the one mineral you need the most in a high-tech society is silver. And without it, you’re not going to have the lifestyle that we have now. And that’s very important to know. So if you have something eating away, you know, it’s like a stock buyback. If you’re taking up 250 million ounces a year, think of it as the float in the stock market and you’ve got company ABC Incorporated, and your buyback is that large. What’s going to happen to the stock price? Well, we all know that what happens is the price goes up. And this was done all the time when the funding money just started moving around everywhere. And so why doesn’t it apply to silver? Well, it does. It just hasn’t caught up yet.
Jim Puplava:
Dave, what are the above-ground stockpiles? Because we’re running 200 million ounce deficits each year. I know at one time we used to have like 2 billion ounces and I think we went through those. What are the stockpiles right now? I mean, where’s this silver deficit? Where’s it coming from? Where are they making up the difference?
Dave Morgan:
It is from the above-ground stockpiles. From 2006 up until about four years ago when we went back into a deficit, we did build up the above-ground stockpiles rather substantially. No one knows. I study this all the time. As you know, Jim, I would say the above-ground stockpiles of silver, so I’m talking commercial bars, is probably still, well, in ETFs, we know it’s about a billion round numbers. And then you’ve got to look beyond that, maybe another billion. So in silver itself, you’ve probably got 2 billion. But you also have to look at the secondary market, which is your coins and small bars for retail investors. I mean, we’ve minted almost a billion ounces in silver eagles now. And that’s kind of interesting to get your head around because that program started in 1986. Here it is 2025, and the average in the very beginning was about 30 million ounces of silver a year. And now we’re getting to 40, and I forget the top, but we’re getting to 40 million ounces a year. I mean, three years, you’re at 1.2 billion, and 10 years is, you know, a billion. So, anyway, the point is, there’s a lot that could be moved into bars. And actually, I should say this. It’s important that the retail market’s actually been net sellers. And I verified this with three different dealers that I know very well. And retail guys are kind of burned out. It’s like, okay, silver’s 30. I paid 30. I paid 25. I got a $2 profit. Whatever it is, I’m tired of it. I bought too much, and I don’t want to hear the word again. And so some of that new commercial bar silver is actually coming from retail melt. Usually these, you know, silver eagles aren’t melted down, but any rounds, bars, jewelry, anything like that, which is substantial. It’s like 150 million ounces a year goes into the commercial bar. So that’s actually helping to mitigate what I think will be a silver squeeze later on this year.
Jim Puplava:
So if we take a look at silver and contrast that to gold, silver, especially with its industrial use, is consumed. Whereas, Dave, every ounce of gold that’s ever been mined is in existence. It’s either in coins, it’s in museums, or it’s in central bank vaults. So silver is consumed. So eventually, you’re going to see these dynamics where, as technology explodes and continues to explode, there’s going to be greater demand for silver in its industrial uses and especially in the green transition movement, whether you’re making solar panels, windmills, or whatever it is. If you’re running these deficits, at some point, something has to give, either higher price to encourage more production.
Dave Morgan:
Exactly, Jim. It will put price pressure on it. I think right now, what we’re seeing with this situation with gold and new highs almost every day will spill over into the silver market. I mean, I’ve studied this market. I’ve said quite a bit, and usually your delivery months, which for silver is March, are your biggest offtakes. And so we’re not that far away from seeing perhaps a lot of silver coming off the COMEX. If that were to occur, similar to what’s happening in the gold market, we might start to see some rather substantial price increases in silver. I’m not predicting that. It’s tough to sit in my chair at times because it’s a very difficult market to analyze. It’s much harder than gold because, you know, the fundamentals, you know the dynamics, and you can even do the math. But there just seems to be this underlying ability for the delta trading paper traders with their algorithms to keep the price within a certain range by using these algorithms. And that’s been done for years and years and years, and it still works most of the time. So how are you going to break that dynamic? You said it earlier, when you get a delivery that doesn’t show up, it doesn’t show up on time, or all of a sudden somebody wakes up and says, “Hey, we need this much silver for inventory.” And the logistics guy on the other end of the phone says, “That’s fine, you’ve got an eight-week hold.” “Wait a minute, that’s on gold, not on silver.” “No, I’m sorry, it’s on silver. In fact, eight weeks is the minimum.” When that takes place, you’ll see a change dynamically, almost overnight.
Jim Puplava:
So what’s the incentive? As you mentioned earlier, silver is a byproduct with the miners. So if I’m a gold miner, I credit silver against my cost of mining gold. Same thing if I’m mining copper. So what changes that dynamic for supply? I mean, there are a few good large silver producers, companies that produce just silver, but you need more of those types of companies because that’s what their primary product is. What’s going to change the dynamic on the supply side?
Dave Morgan:
Almost nothing. It’s price inelastic. Because if you’re a copper miner, as long as you’re making money in copper, you’re not really incentivized to mine more. Now if silver were to go ballistic, you might think about it; they might have a special board meeting and get someone around, they might call me, and I’m being funny, but the problem is it’s always on a spike. So you’re going to see, you know, RTZ, you know, put somebody on a Zoom call and say, “Hey, this won’t last. You know, silver always spikes up and then it comes back down and blah, blah, blah.” So they’re really not incentivized to increase their production rate. Now, a silver miner that’s a primary silver miner might be, but as you said, it’s getting harder and harder to find high-grade silver. And that means you’ve got to move a lot more dirt to get the same ounce of silver out of the ground, which means higher costs. And then if we start getting into something with these tariffs, which we may or may not talk about, you’re incentivized to look at what I call the resource wars or “Wait a minute, this is more valuable than I’m getting paid for it. I really don’t want to ship it in your direction,” or “If I don’t ship it in your direction, you’re not going to be able to build as many missiles or whatever.” I’m on a bit of a tangent. You can reel me back in, Jim, but there’s a lot to the silver market that the average person never even crosses their mind.
Jim Puplava:
Well, speaking of inventories and supply, explain what’s going on between the London Exchange and the COMEX. Gold inventories on the COMEX have jumped 70%. I don’t think we have the numbers quite yet for silver. What’s going on there, Dave?
Dave Morgan:
There was a very big fear throughout the gold industry that these tariffs we put on on February 1, and the London market guys were getting their metal moved from London to New York so they wouldn’t have to pay a tariff. Now, no one knew if the tariffs would really be implemented or not, but just on the idea that it could happen, they got ahead of the curve and they started shipping massive amounts of silver out of London. And it’s sort of like the NFL or whatever is kind of a copycat association. Somebody sees somebody do it. “Why are you doing that?” “Well, these tariffs may be implemented.” “Oh, yeah, I better do it too.” And so all of a sudden, you got a flood of silver leaving the LBMA destined for New York. And that was taking place. Well, what actually took place after that started in earnest was that some of these delays caused further delays for the ability of the LBMA to deliver in a timely fashion. Well, that set off a whole new fire. You had like a brush fire. Now you’ve got another fire a little bit away that’s even bigger. And that fire is repatriation. “Wait a minute. I’ve had my gold with the LBMA for the last, you know, five decades, and so-and-so cannot get their gold without waiting at least eight weeks. Hey, I want mine back too.” And so this is causing some consternation in the gold market, obviously, and we don’t really know exactly how it will unravel. I mean, I have to go back and think about when Germany wanted their gold back from the LBMA. And you know, I was at a conference in January 2017, and I was asked about it, and I outlined it. Jeff Christian, you know, called and said, “Wait a minute, David, you don’t understand that the contract, they have like five years to deliver that gold.” And Jeff’s usually spot on. You know, I’ll give him credit. Absolutely. And so, you know, are some of these people that are stating that we should get our gold right away, is it a callable contract? Does it say, “At any time I call and ask my gold back, I get it back,” or is it, you know, “You have to give us a two-year notice”? Those things? I don’t know, Jim. What I do know is that there’s a lot of uneasiness in the gold market, and again, I think it’s going to spill over into silver probably within the next month or two.
Jim Puplava:
Yeah. Because some of the delays in getting the delivery to the COMEX are four to eight weeks.
Dave Morgan:
And it’s likely to get worse. And if it does get worse, that’s going to add more fuel to the fire. So, you know, I don’t want to be overly hypey here, but facts are facts, and I think there’s a lot of sleepless nights going on at the LBMA because, as you said, if we look at what the total inventory is and we take out the ETFs, the ETPs, and we look at what’s been shipped and we look at what remains, it’s really not that much. And that means that things get tighter and tighter. And as we know, if you have a small supply of something that’s in high demand, you’re going to move the price higher.
Jim Puplava:
You know, you mentioned earlier that there’s been divestment by individual investors of silver, whether they’re dumping their SLV, their ETFs. But one of the things that I’ve seen over the last probably a year, David, is Costco has become one of the largest bullion dealers. They sell gold eagles, they sell silver eagles, they sell bars. And when they put silver on their website, a lot of times within a day or two, you can’t get it, it’s gone. And I think, I don’t know what the figure is, if it’s 100 million or 200 million, but it’s massive.
Dave Morgan:
Yeah, that was really a boon for “metals heads,” as they call them, people that do hedge their portfolios with precious metals, which, in my opinion, everyone should do. And it’s really kind of taken out some of the mom-and-pop silver dealers, which is neither here nor there to me. I try to be neutral. But think about it, a lot of people that have never bought gold or silver before, they trust Costco, and so they see it at Costco and they don’t have that concern about “is it real, is it fake?” And so maybe they’re paying a little more than you would at, say, a local dealer, but it’s a little more. There’s so much peace of mind that I’m buying the silver or gold at this place, that it’s really kind of taken over, I’d say, the retail market in many instances, not across the board, but. And I think it’s in a way a good thing because the problem with buying silver and gold for most people is they have a lot of fear because they’ve never done it. And once they send in that check that usually takes a week, 10 days to get their metal, that seems like it’s two months. Sometimes these new people call the dealer, like every day, “Where’s my silver? Where’s my silver? Where’s my gold?” And of course, once they get delivery, they usually calm down and they realize, you know, it takes some time to get it and that sort of thing, but still over the counter, where you put it in your hand and take it out of the store and you have someone you can trust, that’s a boon to the precious metals industry. I’m all in favor of it, and yeah, the margins are a little higher, but again, would you pay a little more for peace of mind? And the answer is absolutely.
Jim Puplava:
Well, you know, as I look at this fundamentally, I take a look at the silver deficits, I take a look at the industrial demand, I take a look at the green transition. And then, as you mentioned, it’s a byproduct. So, you know, is BHP going to be incentivized to produce more silver if the price of copper isn’t doing well, or iron ore isn’t doing well? I don’t think so. So as we look at that, I mean, we’ve been in the metals, David, since 2019, and last week we increased our position substantially. So, you know, as I look at the macro environment, we’re running massive deficits. Europe’s running massive deficits. China has got problems with debt, Japan has got problems with debt. It’s kind of like we’re in this environment where there’s a race to the bottom with currency debasement.
Dave Morgan:
Absolutely. And you know, silver is probably one of the best ways to mitigate that. But I have to add something I forgot earlier, Jim, coming back to why, you know, silver at this price, one thing that isn’t really discussed very often is the cost of silver to the retail investor. Through Europe, there’s what’s called a VAT, a value-added tax. And it’s quite high in some cases. So the spread on silver, just the bid-ask price like in gold or gold is usually, it depends on market conditions of course, but a couple percent or whatever, and silver, it’s usually in the 5% range and then you put a value-added tax on top of that of say 15%. Now you go into your coin shop and you say, “I want to buy some silver.” And the coin dealer says, “Fine.” And the price of silver’s at $30, but you’re paying $40, you’re going to think, “Why would I buy it? I have to overcome a ten-dollar move in silver just to break even.” And this is a disincentive to silver. Very few people talk about that, but that’s the case. The only place you can really buy silver unencumbered is pretty much in North America. Australia, I believe, is the same, but through most of Europe and Asia, you pay a pretty high premium. Now that’s not true in the futures markets, and of course, in the futures markets, you can take delivery. But I’m talking about your average person that wants to put, you know, 5 or 10% in metals, take it home, and that type of thing. And it really doesn’t exist much out of a couple places. Otherwise, it’s a disincentive to buy it because the margin is so high.
Jim Puplava:
This was probably a little over a year ago if you went to buy, let’s say, a silver eagle at Kitco. Dave, you were paying 70 to 80% premiums on coins. What was driving that? It’s not as bad now, but it was pretty bad.
Dave Morgan:
Well, in my opinion, it was really rhetoric. I mean, there were people out there, some of them I know quite well. I won’t say any names that were talking about how hard it was for them to get silver in that form. And that’s the truth. They weren’t, you know, pushing that. But just because of that statement, people thought, “Oh my goodness, you know, it’s the way to go.” And I was warning people on, you know, my weekly wrap-ups and some of the interviews I was doing and others in my same thinking is that you really don’t want to pay that premium. You want to find, you know, silver and buy the most silver you can for your money. In fact, way back in the very beginning of when I started the website, I wrote the “10 Rules of Silver Investing,” and I forget what rule number it is, 5, 6, 7, somewhere in there, and it says, you know, “Buy the most silver per dollar.” In other words, don’t pay a high premium for certain rare medallions or certain coins because premiums almost always come back to, to stabilize, to normal. And I really feel sorry for those people because, in my opinion, and it’s a strong one, I think a lot of people that bought Silver Eagles at a 14% premium or 16% or whatever it was, which is extremely high, as you just said, they are not coming back to the market. They’re going to look at that dealer and say, “You know what, I believe this. They were running out of silver.” They weren’t running out of silver. And I try to be very explicit, especially these last couple of years when I say the silver market. I’m talking about the 1,000-ounce commercial bar market. If I talk about the retail market, I’m talking about small bars and coins, 100-ounce bars, kilo bars, 10-ounce bars, 1-ounce wafers, 1-ounce coins, 1-ounce rounds. And that’s a big market, but it’s not the market. And a lot of people get the idea that that is the silver market. No, it is not. And if you don’t really know the difference between the two, you can get a little bit confused, and you think, “Oh my God, we’re running out of silver. Look at the cost of certain coins.” And it’s a disservice, in my opinion.
Jim Puplava:
Well, if we take a look at Kitco today, the premiums on a silver eagle are running between 12 and 13%. So they’ve come down a bit. So Dave, as we close, what would you recommend investors do? I know you are a big believer that everybody should have some bullion, maybe some mining stocks as well. And speaking of mining stocks, I’ve never seen mining stocks this undervalued in the precious metals space. And I compare what these companies are selling for today compared to, let’s say, what they were selling in the ’00s decade where they were overpaying to buy other companies. They weren’t good stewards of cash flow and money. That’s not the mining industry today.
Dave Morgan:
It’s much more disciplined, far more disciplined. Well, you don’t have to take it from me, although I’m going to say it, kind of reiterating what some of the best analysts in the market have to say, and it is simply this, that one of the best leveraged places you can be is in a silver miner. And I just got off the phone this week on Monday with one that’s out of the Keno Hill area, which is one of the most prolific areas in Canada for silver. And they still have extremely high grade; they’re having trouble raising money, but they’ll get it. And there’s another one that we did for the Morgan Report that’s in Colombia, and my new hire, Ted Butler—not the Ted Butler everybody knows, but his name just happens to be Ted Butler—is there on site. And this is another very high-grade situation. But these are high risk, high reward. The point being is that they’re so low, so undervalued that if you’re prudent and buy what I consider a small investment in what watch it, I think you’re actually going to be happy. A few years out, we are basically seeing a big contraction in the above-ground supply of silver. And that can only point to one thing, and that is higher prices. And so if you have some patience, I know I’ve been saying it for years, but you know, we had a great run from 2000 to 2011 and then we went into this basically long duration recuperation phase where we saw gold go from, you know, the $2000 level in September 2011 down to about half that now. It’s making new highs. Silver hasn’t done that. Silver’s gone from, as you said, the $50 close to it in April, May of 2011, and we’re barely in the $30s now. But silver has a propensity, as I said earlier, to really play havoc. And it’s such a small market. And there’s something in those algorithms too, and that is that they are geared to short silver and keep it within a certain delta. Delta’s a bid-ask. You could think of it as it’s a high and a low range, and the higher the price gets within that range, the more options are sold against it to drive the price down. And those algorithms work really well. But they also have, let’s say, a clause or clause is not a good word, they have a math formula that if it gets above a certain level, they have to sell their loss, in other words, their short position and go long. So they’ll sell in reverse. And a lot of traders in the futures market have built-in programs that are selling reverse. They’re neutral to which way the market’s going to move. They let the market tell them. So if the market’s going down, down, down, all of a sudden it pops up and it continues, they’ll stop and they’ll move and they’ll go the other direction. And I think that’s something that could, I’m not saying would, take place. Jim. So still bullish on the market, it’s been frustrating, but nonetheless, with all this happening, I think we’re going to see a good year for the precious metals. $3000 is almost a gimme in the gold market. And I said $40 this year for silver. Whether it hits it for one day or one month, I don’t know. But I think we’ll get into that range by the end of the year.
Jim Puplava:
All right, well, listen, Dave, as we close, why don’t you tell our listeners about the Morgan Report?
Dave Morgan:
The best way to get familiar with our work is just to go to the Morganreport.com, get on that free email list. If you’re interested in a subscription, you can just hit the subscribe button. We go through the whole idea. And lastly, I’m finishing up the documentary. You can look at that at SilverSunrise.tv. There’s some trailers there. And our producer’s putting together the film as we speak. We’ll probably have it out probably by the middle of this year. And a lot of time and effort went into that movie. And I kind of looked at silver and money, mostly money, really, even though it’s Silver Sunrise. But it’s about the amount of control and stress people have around money and what can we do to change that. And I think education is key, and that’s why I decided to do this documentary. Jim, so thanks for giving me the floor.
Jim Puplava:
Well, we’d love to have you back when that comes out and talk about it, Dave, all the best. And hope to talk to you again.
Source: Dave Morgan: Silver Set to Shine in 2025 as Gold Hits New Highs
