Silver Could Soar! If We Switch to Optimistic Mode

It is difficult to remain optimistic when reading the news these days, but market experience tells us that it is precisely in the depths of pessimism that it is worth considering an optimistic scenario.

Elements of a possible optimistic scenario and its impact on the silver price

What would happen to the silver price if...

• Donald Trump genuinely means business on brokering peace in Ukraine and a short-term compromise acceptable to the Russians is reached. While Putin currently has little incentive to conclude peace -- his objectives have not yet been achieved and the slow war of attrition appears to be working -- a ceasefire remains within reach.

• The market comes to believe that Elon Musk's budget committee (DOGE) can genuinely save $2 trillion per year without tipping the US economy into recession or causing serious social disruption from the likely layoffs of several million government-dependent employees.

Do not underestimate Musk's ability to spin a compelling narrative. They will announce that all the data has been fed into an AI-powered supercomputer and will demonstrate where efficiencies can be found.

They will also communicate that it is perfectly viable to fund retraining for those made redundant, or to offer voluntary early retirement, community work, or basic income.

• A temporary compromise with China could be reached -- including on tariff levels -- and neither side presses the question of Taiwan's status.

If one thinks it through: in the longer term, Taiwan will in all likelihood become part of China, and there is little that can be done to prevent it. However, the US needs time to build domestic semiconductor manufacturing capacity. China can afford to wait.

Should the above optimistic scenario materialise, at least a temporary dollar renaissance could follow, and among precious metals, the real standout winner could be silver.

Why? The silver market has seen demand outpace supply for years, creating a serious and persistent deficit.

Above-ground stockpiles are still sufficiently large, and until now the shadow of a possible recession has dampened speculative interest in silver -- which is why the price has not yet taken off.

The silver market has been in structural deficit for years

The chart shows supply and demand trends in the silver market from 2014 to 2024 in millions of ounces, highlighting the market imbalance and deficit. Based on the data, the growing deficit from 2020 onward attracts significant attention, as the chart also includes estimated figures for 2024. Demand peaked in 2021, while supply has been less volatile. This analysis provides valuable insight into silver market dynamics and long-term trends.

Source: Conclude Zrt., Silver Institute, Metals Focus

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However, prices could spike sharply and suddenly -- because if world trade does not grind to a catastrophic halt and the green industry continues to expand (electric vehicles, solar panel manufacturing, and so on), all of which consume vast quantities of silver, speculators will jump on that train immediately. We saw in the early spring of 2021 that even a few thousand retail investors are capable of moving silver's relatively small market.

In this scenario, the first price target would be $50/oz.

Consider that with a strengthening dollar and a relatively weaker forint, the price of silver per gram in Hungarian forints could approach 700 HUF, representing a gain of nearly 70% from current levels.

XAG/HUF exchange rate 2020-2024. Silver has reached an intriguing juncture.

The outlook for silver prices continues to appear favourable, supported by the long-term upward trend visible on the chart. The price stands at 385 HUF per gram, showing significant growth compared to recent years. The stability of the silver market and the continuous growth in demand for the precious metal paint an optimistic picture for future price developments, particularly for investors.

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_Of course, nobody can see the future, and everyone must make responsible decisions about their own investments. That said, it may well be worth allocating capital to a silver account now as well -- while maintaining existing gold positions -- and accepting that if the above scenario does not play out, it could take a considerable time before the market rediscovers silver._