Think of it as a potential silver lining for investors. A deepening shortage is promising to help boost prices as haven demand for the precious white metal rebounds in 2019.
Silver surged 9.1 per cent in December, its biggest monthly gain in almost two years. The commodity has benefited as a persistent trade war, weakening dollar and prospects of slower pace of US rate increases drove haven demand for precious metals. The price outlook is improving at a time when demand for gold's cheaper cousin is poised to top production for a seventh straight year.
With miners avoiding new projects amid global economic uncertainty, the price could spike as high as $17.50 an ounce from about $15.87 now, according to a Bloomberg survey of 11 traders and analysts. About 26,000 tons of silver is expected to be produced this year, according to estimates by Robin Bhar, a London-based analyst at Societe Generale SA. That would be the least since 2013, and means global physical demand will again top output.
"Supply growth has started to slow, more than for any other precious metal," said John LaForge, the head of real assets strategy at Wells Fargo Investment Institute.
To be sure, a production deficit hasn't been enough to boost prices in recent years. Silver has traded more like a precious than an industrial metal, which is strongly influenced by supply and demand balances. The price of silver has plunged by almost half since 2012, the last time the market was in surplus. That was faster than the pace of decline for gold, the most heavily traded precious metal.