Silver Demand Surges: Are we Poised for a Significant Déjà vu Moment

With the Silver Institute's Survey 2024 release projecting the second-largest worldwide shortage of silver in over two decades, it’s easy to get excited about this commodity. Looking back, we can draw parallels between the current market dynamics and 2010. As such, I cannot help but wonder if we are poised for a significant déjà vu moment in the silver market. If history repeats, we will likely see a monumental move in silver prices, offering savvy investors a unique opportunity.

What will drive silver to surge?

Right now, demand for silver is skyrocketing beyond its traditional uses to emerging technologies, including electric vehicles and renewable energy projects. Like gold, silver has been used as a safe-haven asset during economic uncertainties and inflationary pressures, and I see no reason why this would not continue.

In 2010, a number of factors, including loose monetary policies and geopolitical tensions, catapulted silver prices from around $17 per ounce to a peak of nearly $50 in less than a year, resulting in a gain of almost 200 per cent. Fast-forward to today and you will see the same characteristics in the silver market.

If we are on the doorstep of the next major bull market for silver, it's time to look at the opportunities that may present. One stock that stands out as an opportunity is Adriatic Metals. This Australian-based company is poised to capitalise on the soaring demand for silver, but here’s the part that has me excited. From August 2010, its share price rose almost 300 per cent in less than 12 months.

Currently, Adriatic Metals share price indicates that I am not the only one looking at this stock. Price has risen steadily since May 2018 and is now hovering near its all-time high of $4.50. The stock has a history of rising in line with the silver price, and with demand already strong, a repeat of the silver rally in 2010 could see the price of Adriatic rise strongly. Therefore, I encourage you to look closely at the prices of silver and Adriatic Metals for the next opportunity.

What were the best and worst-performing sectors last week?

The best-performing sectors included Healthcare, up 2.60 per cent, followed by Information Technology, up 2.52 per cent, and Consumer Staples, up 1.07 per cent. The worst-performing sectors included Energy, down 3.02 per cent, followed by Industrials, down 1.58 per cent, and Materials, down 0.69 per cent.

The best-performing stocks in the ASX top 100 included Resmed, up 12.82 per cent, followed by Newmont Corporation, up 9.34 per cent and South 32 up 5.64 per cent. The worst-performing stocks included Bellevue Gold, down 11.31 per cent, followed by Brambles, down 8.18 per cent and Woodside Energy Group, down 3.88 per cent.

What's next for the Australian stock market?

Last week, the buyers wrestled back some control with the All-Ordinaries Index up two per cent. Interestingly, the buyers stepped in around the 7,800 level, which is what also unfolded in February of this year. For now, it's clear that there is support from buyers around 7,800, but with the way the market fell the prior week, don't be too quick to assume that it will resume the uptrend to make a new all-time high.

We know historically April has been the market's strongest month and is volatile and we have certainly seen that this month. Given last Friday's low close and with only two trading days remaining in the month, it is highly unlikely we will see a four per cent rise to make a new high before months end.

Regardless of what plays out, we know the market typically makes its mid-year low in the May/June period, so I am still anticipating a move down over the next few weeks. During a down phase, most stocks are prone to fall, and all too often, I see traders wrongly assume that all stocks will fall. If you are looking to buy, the trick is to know which sectors to look at to find stocks with a higher probability of bucking the trend.

Right now, I would encourage you to look to the Healthcare sector, as historically it has shown that it holds up the best when the market is falling. Some notable names to watch include CSL, Cochlear and ResMed.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.