Silver's Signal vs. Noise

Podcast Transcript

*This podcast was recorded prior to January 30, 2026, a day which saw the most intraday volatility for the silver price on record, making the forthcoming discussion all the more timely and relevant. We hope you enjoy it.

Ed Coyne: Hello, and welcome to Sprott Radio. I'm your host, Ed Coyne, Senior Managing Partner at Sprott. Today, we have one of our very own portfolio managers on, Maria Smirnova, our CIO and Senior Portfolio Manager at Sprott Asset Management. Maria, thank you for joining me on Sprott Radio.

Maria Smirnova: Hello, everyone. Ed, thank you for having me back.

Ed Coyne: Maria, the two years with silver have been incredible. You do all things silver. Let's just start with what kicked off this incredible run we've had in silver for the last year and a half, two years now. What were some of the things that really got this going?

Maria Smirnova: I think this rally has been long in the making. We've been following the silver market for a long time. We've tracked all developments over the last 10 or 20 years. Of course, as most people know by now, silver has been in a physical supply-demand deficit for at least five to seven years, depending on whether you count ETFs. I count ETFs as part of the demand equation. I say silver has been in deficit for seven years.

What has driven that deficit is a stagnating and declining mine supply. Believe it or not, in the last 10 years, we've lost ounces from mine supply. On the flip side, demand has been growing, particularly electronics and industrial demand. When we talk about electronics and industrial demand, we're largely talking about solar, electric vehicles and the build-out of AI data centers. Silver is instrumental to the world's electrification.

It has many different uses. That's been growing to record levels year after year. Therefore, we've faced this complete shortage of physical silver. Last year, we started talking about potential tariffs on silver in the U.S. That sparked a bit of a supply squeeze in London. Most of the physical silver is stored at two exchanges worldwide. One is in London, at the LBMA (London Bullion Market Association), and the other is at COMEX (Commodity Exchange Inc.) in New York.

Metal started moving from LBMA to COMEX last year because the level of unallocated silver in London became so low that it was lower than daily trading volume, which is phenomenal. That's sparked the rally. Thinking back to last year, when silver broke through $35 in about June, that was very significant. Silver has been doing a basing pattern for many years. Once it broke out, it took on a life of its own last year.

Ed Coyne: Is there enough silver for data centers and AI and all these other things we're doing? Is there enough silver to meet that demand? What are you hearing out there? What are you seeing out there as it relates to supply-demand dynamics? I think you said we're now in a seven-year deficit. At some point, there has to be a reckoning that, "Hey, we don't have enough silver to do what we want to do." Is that potentially driving some of this price movement and volatility?

Maria Smirnova: Yes, it certainly got us here today. Given recent prices, we are reading about some erosion in demand for silver, for example. Now, how significant and how fast that can happen, I don't think it can happen that fast. Right now, we're also seeing strong investment demand from the East, particularly from China and India. Silver is trading at significant premiums to spot prices in both China and India.

I looked at Bloomberg today, and it was around 20% to spot. It's a very significant premium. China is importing all this silver. Why? Because of the industry, there's also investment demand. Similarly, in India, coins, bars, jewelry and ETFs have all been growing since late last year. The higher the price has gone, interestingly, the more demand has been sparked over there.

To answer your question, there are many moving parts. The key question is, where will we get the silver? There are two primary sources: mine supply and scrap supply. Scrap supply has been quite flat over the last 10 years, just under 200 million ounces. Now, that's not even a lot of ounces, if you think about it. We'll see what happens to scrap. At what point do people start bringing their jewelry, spoons, etc., to recycle and sell for scrap? That's question number one.

Question number two is what happens to mine supply? It’s very difficult to bring on new mine supply. It takes at least 17 years for a new mine from discovery to production. It's quite inelastic. We've had a shortage of new silver mine discoveries in the last few years. We've had all kinds of geopolitical things and other factors.

Permitting has been getting longer worldwide. There are a lot of moving parts on mine supply, and I don't think that it's going to be easy to add silver mine supply. To put things in perspective, let's say the deficit is currently between 100 million and 200 million ounces. This is based on a total supply of 1 billion ounces per year. To fill that gap, we need between 10 and 20 new, very substantial mines.

Do we see that on the drawing board? We see some mines on the drawing board, and my job is to look at silver and gold mining equities every day. I don't see enough to fill that gap. To fill that gap, we're going to have to see some destruction of demand, which we're not yet seeing, or an increase in scrap. To your point, I don't know where it's going to come from. Therefore, I think that's why silver is where it is.

Ed Coyne: It's interesting. You're hearing calls for silver at $150. I've seen as high as $300, but you're also getting some calls for silver to return to $40, $50 or $60 an ounce. It seems to me that people calling for a price target aren't understanding the drastic move silver has made, stepping out of the precious metals realm into the critical materials realm. Is silver truly now a critical material that's being consumed, has its own personality, and has finally stepped out of gold's shadow? In your view, is that happening now? Is silver truly a consumer metal?

Maria Smirnova: Yes and no. To go back to your initial comment, I absolutely agree. I think there's very little consensus right now in the analytical community about where the silver price will go next. I haven't seen these types of moves so fast before. To your point, the question is, what's driving it? The industrial demand side has been building for a long time. It's roughly 50-50 between investment and industrial demand. As I said, demand might erode going forward.

To me, silver is a critical material. Over time, we will need more silver for all of these uses. That theme of the world electrifying, building out power grids, building out data centers and electric vehicles is not subsiding. I think, over time, we'll need more silver. Investment demand still plays a very important role. For example, in countries like India and China, silver is viewed as a monetary asset.

In India, specifically, there's a lot of silver jewelry, but jewelry's not viewed as consumption. It's viewed as an investment. The question is, would all the people who have silver jewelry run out and sell it? I don't know the answer to that question. I don't think so, though, because it's viewed as an investment more than anything in certain places in the world. That means that investment remains a very important factor.

Ed Coyne: Speaking of investment, I assume you roll that into the whole concept of store of value. If you have a silver necklace, you have silver jewelry, and so forth, it's storing part of your value. It's part of your net worth. It's part of your portfolio.

Maria Smirnova: Absolutely, yes.

Ed Coyne: It's interesting when you were talking about people turning in their silver jewelry to scrap. I was at a party this weekend. People know what I do for a living, and they were coming up to me and asking me about turning in their necklaces and things. That's never happened in my entire career at Sprott, just north of a decade now, that people are starting to at least think about that. Maybe it needs to be higher before scrap becomes a significant part of the inventory equation. Have you ever experienced a stress moment? Is there a magic number where you start seeing more scrap come to market?

Maria Smirnova: Scrap supply has been stagnating under 200 million ounces a year, so we haven't seen that pinch point yet. Again, you're talking about people in the West and there's much more interest in the East.

Ed Coyne: Yes, good point.

Maria Smirnova: For example, in January, we're seeing some outflows out of ETFs in the West, right?

Ed Coyne: If you went back two, three years ago and said silver is at $50, that'd be considered a huge win. Maybe it has gotten a little ahead of itself. Maybe the market's gotten a little too enthusiastic. In your mind, what would cause a meaningful pullback? We'll call a meaningful pullback, say, 20% or 30%. Right now, we're seeing volatility in the 5% to 10% range.

Just this week alone, we've seen silver off by 5% to 10%, and the next day it's up 5% to 10%. It feels like volatility is working its way into the market. Either A: that's setting the stage for a higher high, or B: maybe people are taking profits. We'll see a bit of a pullback here. Any thoughts directionally on where that could be headed in the short term?

Maria Smirnova: It's hard to tell. Pullbacks are healthy. Even if we have a 20% to 30% pullback, that'll only take us back to a couple of months ago. If not, maybe even a month ago. I'm not afraid of pullbacks. Silver is a store of value. The dollar (DXY) is going down right now. President Trump seems to want a weaker dollar. He wants lower interest rates, etc.

That all argues for higher silver, gold, and copper prices, and for higher prices across the board going forward. Even if we have a pullback, I think silver will go higher in the long term for many reasons. These are structural developments and are not short-term things. I'm talking about a span of 10 years here that we've been coming to this point, if not more. Mine supply and new discoveries are hard to come by.

Another thing about mine supply, is that it constantly disappoints. Whatever projection you have, it usually comes in lower than expected because there's always some kind of operational issue or a strike or something like that. I am digressing a bit. Just to go back, that's one reason: supply. I think the trends in demand we're seeing aren't going to reverse. There might be some pullback in solar installs or silver used in solar. Year over year, we should see longer-term growth in demand.

Ed Coyne: Speaking of demand and staying on demand, one of the questions I get a lot from investors and advisors is, are there any replacement metals that could effectively, if silver continued to get limited in supply, or if the price got unreasonably high, say, in the $300, $400 an ounce range, is there anything that can step in and alleviate some of that? Is there another metal that could replace silver, at least on the margin?

Maria Smirnova: The metal we usually reference as a substitute for silver is copper. It also has good electrical conductivity. We're reading about it again in China because there's so much demand for silver there. They're trying to calm the market. There have been recent articles about how Chinese solar panel manufacturers plan to switch to copper to reduce silver use.

Again, that's a big question mark. How fast can that happen? How fast can you develop new technologies and retool your factories? By the way, the copper price is going up right now as we speak, and there’s also a deficit of copper. To answer your question, copper is the metal we usually think about.

Ed Coyne: You've touched a little bit on the miners themselves. The miners seem to be back in vogue here when you look at their balance sheets and so forth. Let's spend a few minutes on the miners because, as you mentioned, I think I wrote this down correctly: you said around 17 years from discovery to production, of pulling actual silver out of the ground. How is the health of the mining industry right now, particularly as it relates to silver, just in general?

Maria Smirnova: That's an excellent question. I think the mining companies are doing better than they have in a long time. Even before this price run-up, I think mining companies have been trying to fix their balance sheets. They have been focused on operational efficiency, reducing debt and returning capital to shareholders. That started before these jumps in gold and silver prices.

With these price levels, they're making fantastic margins and free cash flow. They're returning capital through share buybacks and dividends. They're doing all the good things. This is what I like to see. They're starting to increase exploration budgets. I always want more exploration dollars in the ground because that's how we make new discoveries. Hopefully, with these higher prices, we can see a resurgence in nice results from these companies.

I don’t think mining equities, and particularly silver equities, are pricing in current silver prices. I think the market is not incorporating silver spot prices. It's like the market doesn't believe spot prices yet. Part of the issue is that, generally speaking, sell-side analysts don't really use spot prices to value assets or set targets.

Also, sell-side analysts usually have declining metals prices. That's why the miners haven't really caught up. Depending on how the silver price settles, plays out, and holds, there's an opportunity in silver miners. I think our strategist, Paul Wong, wrote recently that the silver miners have been breaking out on a very long-term basis. Turning around and breaking out, and he's seeing positive patterns there. I think we are in a period where, if things continue the way we see them, there's a big opportunity in the silver miners.

Ed Coyne: You mentioned something. I just want to get clarification on this. Analysts typically don't look at spot prices. What are they looking at then to understand the valuations of some of these companies? What price are they looking at?

Maria Smirnova: They have their price decks, right, which are just assumptions about the metal price per year going forward. A lot of the time, commodity strategists set these price decks. As we've just discussed, very recently, there's very little agreement.

Ed Coyne: Right.

Maria Smirnova: I've seen projections ranging from $150 silver to maybe even $300 silver. Then, as you mentioned, some other analysts are talking about silver at $40 or $50. It's undecided currently.

Ed Coyne: What would you say to an investor that maybe has had success in silver, but more importantly, an investor who's maybe looking at silver for the first time, that this run-up has got their attention? They want to think about it. How can they make it part of their portfolio going forward? What would you have them think about? What should they consider as they look to add silver potentially to their portfolios?

Maria Smirnova: Everyone has a different situation. I'm quite biased, as you can appreciate. A lot of my wealth is linked to the metals and our firm. I would say think longer term and consider what's happening in the world. One of the biggest drivers is the global geopolitical situation. Basically, what's happening is there's a worldwide fiat currency debasement.

For yourself, obviously, we're not all solar makers, etcetera. We're investors. I would consider how you view the world and what you think of where the dollar's going, where's the Canadian dollar going, and I'm in Canada, right? How do you protect your wealth? That's how I would think about it. To me, gold and silver are integral parts of protecting your wealth against inflation and currency debasement. Governments can always print more money. As we have learned, it's not very easy to print more gold and silver.

Ed Coyne: That's right.

Maria Smirnova: And I will leave it at that.

Ed Coyne: I always hear, governments have two advantages that we don't have in our balance sheet. We can't tax or print. We have to either earn, invest or save. Those are the levers we have to pull.

Maria, it's always great to catch up with you. I know I'll see you in a couple of weeks for our quarterly board meeting. It'll be good to see you in person, but it's always a treat to have you on our podcast. I know our listeners love hearing from you and what you're doing in silver, so thanks for taking the time today.

Maria Smirnova: Thank you very much.

Ed Coyne: Thank you all for listening. Once again, I'm Ed Coyne, and you're listening to Sprott Radio.