U.S. Credit Downgrade Doesn’t Even Factor Inflation Risks

Mike Maharrey: Greetings. I’m Mike Meharry, a reporter and analyst here at Money Metals, and I’m joined today by Michael DiRienzo. He’s the president and CEO of the Silver Institute. How are you doing, Michael?

Michael DiRienzo: Doing great, Michael. Thank you so, much.

Mike Maharrey: Well, I really appreciate you coming on and talking a little bit of silver with me. Before we dig into kind the market and some things that are going on, I wanted to give you a chance just to real quick explain to folks exactly what the Silver Institute is and what it does.

Michael DiRienzo: Sure. So, it was started in 1971. It’s ongoing with no interruption since it was originally based in New York for a year. Now it’s in Washington DC. Our members are the leading mining companies, refiners end users of silver and so, forth. And we we’re charged with Marketing Silver. So, we put together programs that will hopefully lead to greater demand and awareness for silver throughout the world. We’re involved in programs in China, Peru, and Mexico and in India. We’re small. Okay. We’re not as big as the World Gold Council staff wise or monetarily, but we do a lot with what we have. So, we put out reports like the World Silver Survey. We do reports called Market Trend Reports. We put out one earlier this year on above ground silver stocks. We’re putting out two more this year, one on silver’s use in batteries and another one on the silver bullion market.

Michael DiRienzo: So, taking a close look at coin and bar demand. We have a bimonthly silver news. We just put out a press release yesterday on US Retail Jewelers Sales and Interest from 2024. We commissioned a study on that. So, look, we do a lot with what we have and we speak at a lot of conferences. Mike, I’m going to, I was in India last month, this month or next month I’m going to Singapore for the Asia Pacific Precious Medals Conference. We’ll be at the LBMA in October. Also, in October, we’ll be co-hosting a big conference in China, the China International Silver Conference. So, we have a global reach and we’re also, very active on social media.

Mike Maharrey: Yeah, I use a lot of your data. You guys are invaluable for folks like me who are reporting and keeping watch over the market. I really appreciate the work. In fact, you mentioned the jewelry survey for the US jewelry market and actually use that data and put together a little article today that’s published over at moneymetals.com/news.

Michael DiRienzo: Terrific.

Mike Maharrey: Yeah, really appreciate the work you do. So, I wanted to talk a little bit first about the 2025 World Silver Survey that came out. I think it’s been about a month ago now, but it kind of got some of the final numbers for supply and demand trends last year. And I’ll just give people a real quick overview if they’re not familiar, they should be. We’ve been reporting on it, but we had the demand outstripping supply for the fourth consecutive year, so, structural market deficit of 148.9 million ounces. We had a record in industrial demand, although overall demand was down slightly, not significantly. Was there anything in the report that really stood out to you or surprised you?

Michael DiRienzo: Well, this is, you talked about global overall demand and that number not being as high as it has been in the past, and that’s really primarily when you delve into the report. The reason is that on the investment side, on bullion and ETFs. ETPs actually did pretty well. But retail coined and bar demand, especially in Europe and in the United States was really down last year and that’s one of the reasons why that number was lower than usual industrial demand. You mentioned that that hit another record. We thought it would be in November. We thought it would be over 750 million ounces, but it didn’t quite get there.

But nonetheless, it was 680.5 and some of the reasons why that number didn’t hit 700 was the Chinese and the Chinese economy, as you know, is not performing as it was in 2011 and 2012. And so, that has had some impact. Fortunately, India has picked up a lot of China’s normal demand center. So, for example, they’re leading the world in jewelry demand, silverware, demand. You can’t believe what they’re doing on the investment side these days. They’re launching basically a new exchange traded product every week, if not month, and they really are a major player just like China in the global silver market.

Mike Maharrey: Yeah, it’s interesting. Do you see a dichotomy, I talk about this a lot in the gold market. There’s definitely been a shift in recent years from the west to the east where we’re really seeing Asian markets, particularly China driving the gold demand. It’s been a big part of the Gold Bull run we’ve seen in recent months. Do you see that same dichotomy in the silver market particularly maybe on the investment side or maybe on the industrial side as well? We have this.

Michael DiRienzo: Yeah, we are seeing that. I mean, you look at the importance of those two countries, and China is the world’s third largest producer of silver, and we started a program with them 20 plus years ago, the moment their government allowed its citizens to hold gold and silver, which opened up those markets.

We were on the ground a couple months later and formed relationships with the key silver players in China. And of course you’re dealing with a lot of government officials, quasi-government organizations and so-forth, and also, their exchanges and gold and silver are such different metals when it comes to investment. And primarily because gold has a greater monetary value. I mean, it’s held by central banks, whereas silver is not. So, the Chinese in the last 20 plus years just look at the China Gold Exchange, the Shanghai Futures Exchange. There’s another exchange that we work with quite often called the Shanghai Huong, which deals primarily in the white metals, so, platinum, palladium, and silver.

And yeah, there’s been a significant increase. And as China goes on the gold side or as China goes with respect to gold, so, does the gold market and you can clearly see when the Chinese are on a national holiday with gold because the interest in gold demand or as an investment sorts to come down a bit. So, yeah, there are two important centers. We think that the Asia Pacific region is a key market for silver. My speech next month at the Asia Pacific Precious Medals Conference will be further developing that market and I’ll suggest some ideas to the attendees at that conference. So, they’re very important countries. Yes.

Mike Maharrey: So, we talk about the market deficit, and we talk about demand outstripping supply, and I’m not sure people really have a grasp on what exactly that means. I mean, if you’d listen to it and take it at the extreme, you would think, oh no, there’s not enough silver. And obviously people are getting the silver to do the things that they need to do. What exactly is a market deficit and how is that deficit covered?

Michael DiRienzo: Well, it’s quite interesting. We get that question a lot. There are others in the world of silver analysis who do not believe that we are in a deficit market, but it’s just simply looking at the supply that comes to the market in a certain year and the demand that comes to the market in a certain year. And quite frankly, over of the three previous years prior to 2024, mine supply was pretty even and it was slipping and that had a lot to do with some geopolitical issues in certain countries.

Had a lot to do with strikes and so, forth, and some of the leading producing countries, but demand continued to grow. So, our struggle on the silver side to outperform reflects basically you got to go back to the gold side, it’s monetary attributes, which makes it more attractive for portfolio diversification. And as I mentioned earlier, central bank and institutional investors who hold a long-term view. One of the things that people ask us about is that if there’s such a, like you mentioned a deficit, why then isn’t the price higher? Why isn’t the price at even 35, 40 or 45 or even 50? We feel that silver is a dual use metal. You know that on the industrial side, it’s also, a store of value and it has been for centuries, it’s industrial demand. While it’s robust, investors today still have a cautious look at the Chinese economy, but when you look at the deficit, the question you asked, I mean we have a lot of silver above ground and those stocks are being drawn down.

You just have to go back just a few months ago, the importation of silver from London and from Asia with respect to the potential threat of tariffs, 25% tariffs coming in from Canada and Mexico. And we’re proud that that has been alleviated to a certain extent. You never know in this administration when that could change, but quite frankly a lot of silver came over, a lot of gold came over, and quite frankly, that was all a result of the various banks and so, forth, and the end users who rely on a silver supply to have it on the ground in New York in the vaults before the tariff. So, look at, yes, there is a deficit in the market. We’re calling for a fifth consecutive year of a silver market structural deficit. While it may not be as big as in years past, it still will be a deficit. And as mine supply ramps up throughout the world, if and when any new major silver deposits already discovered, that number could shrink. But for now, this is the case and our consultants at Metals Focus who have 35 plus employees, eight offices across the world are in regular contact with the major silver players.

Mike Maharrey: So, if I’m somebody that’s trying to source silver, just to make sure I’m understanding this correctly. It’s not that I can’t get it, but when you have a deficit like this, you’re having to maybe pull silver from an investment area over into an industrial situation. Is that of right?

Michael DiRienzo: That’s correct.

Mike Maharrey: So, that’s the movement of metal that’s already above ground that’s really being impacted at this point.

Michael DiRienzo: Exactly. Yeah. I really encourage your readers to look at the report we put out in February on aboveground stocks because the complexity involved with aboveground stocks is quite striking. You’ve got, like you mentioned, you’ve got silver that’s going into industry. You’ve got silver that’s going into investment, you’ve got silver that’s going to for the production of whether it be Canadian Maple Leafs or the American Eagle coin using those two as an example, I mean there’s a steady demand for silver and we haven’t really seen a squeeze in the market yet with respect to those entities able to obtain silver.

Mike Maharrey: Right. You mentioned the tariff situation, and as you alluded to at this point, it seems that precious metals have been by and large exempted, but we did see that big movement of metal, particularly as people were worried about it, they’re like, what’s going to happen? And people were very proactive in both a silver angle. Do you feel like that the situation has kind of been alleviated and what are your takeaways from the whole tariff incident?

Michael DiRienzo: Well, on a personal side, I don’t necessarily believe in tariffs. I believe in fair trade and the president made the argument that we were being treated improperly by many countries. You remember when he was elected in 2016 and 2017, he had real targeted narrow in scope tariffs. So, for example, Chinese washing machines, Chinese manufactured solar panels and so, forth. And his intent obviously was to build up a domestic base here in the United States of on the manufacturing side and to get fair trade. We were very happy to see, as I mentioned earlier, that bullion was carved out, I believe it was line item six in his trade note on April 2nd. But nonetheless, it could change. It could change in a minute. And what was happening, Mike, especially on the gold side and also on silver, you had these huge premiums. You had the exchange physical EFP that potentially could have squeezed the market even more than it already was. There was, I don’t want to say or use the word panic, but after the election in November, you started to see these banks and other end users of silver really taking a different viewpoint and trying to get as much of it to the United States as possible before them. We are also, concerned, Mike, with Dore being shipped from Canada and Mexico to the United States for refining.

Michael DiRienzo: And whether or not they would be subject to a tariff, but they were always included in the US Mexico Canadian trade agreement. So, that is pretty much is ongoing as of now. So, we have a wait and see attitude, but I think what we’ve proved, just like what the world proved during covid, that you could work from home, you could work in office and so, forth, and we think we’ve proven that in the event something of this nature arises again, we can get the shipments of silver into the United States for industrial or investment usage.

Mike Maharrey: Yeah, I was just thinking that very same thing. It did kind of show the robustness of the market, I guess its ability to adjust to that situation, and I thought that was pretty interesting. I also, think it’s interesting just from kind of a broader economic standpoint, it goes to show that incentives matter, right? When you have even the threat of taxation or fees or all of these type of things that governments can impose for various reasons, they do matter and they do have significant impacts on the way the market actually operates. And I think people forget that sometimes.

Michael DiRienzo: Yeah, it’s a great point. And they do, and sometimes you’re not prepared. We work with the World Gold Council and the International Precious Metals Institute on perhaps writing a letter to the incoming trade ambassador to the president elect himself. We chose not to, we didn’t want to really raise a red flag about gold and silver. Sometimes if you’re waving too much in the back of the classroom, the teacher’s going to call you out. So, we took it as a wait and see approach. But the industry itself, like you mentioned, really was a droid in coming up with a game plan.

Mike Maharrey: That was my strategy in high school. Sit in the back and keep my head down. Don’t raise my hand.

Michael DiRienzo: There you go!

Mike Maharrey: So, looking at the pricing of silver, the number one question I’m getting, I’m sure that you get this all the time too. We’ve had this huge rally in gold. We’ve seen gold hit multiple record highs, and we’re still well off of silver’s all time high of around $50 an ounce. And people are like, when’s it going to catch up? What’s going on? What is your overall impression of where the price of silver is? Right now we’re at a hundred to one roughly gold to silver ratio, which is very wide. How are you kind of seeing the pricing situation right now? Do you feel like gold or silver is priced where it should be in terms of the market, or are we going to see some adjustment? And obviously I’m not asking you to have a crystal ball. None of us knows for sure what’s going to happen.

Michael DiRienzo: Yeah, exactly. And while we don’t give up price projections, we do have thoughts on that issue. Look at, we’ve had some deficits since 2021, and we’re also, challenged with an ample supply of above ground stocks. So, that takes some of the incentive for an investor to get into the silver side. Gold’s Run was in tandem with constant and significant purchasing by central banks of gold. Okay, that’s

Mike Maharrey: True.

Michael DiRienzo: And on the other hand, too, gold is also, fortunate to experience a lot of institutional investment demand, whereas on the silver side, it’s not as robust as it is for gold. So, there are some VAT taxes in Europe on silver coins and so, forth. There are some challenges facing the market, but we think that when it tightens up, again, institutional investors will come back into the market. And this is something that we’re working on this year where through our Silver Institute’s membership and executive committee, we kind of want to go on a road show to some of these large institutions that are in the gold market and really start to point out some of the benefits of also, taking a close look at silver. Because quite frankly, as the world becomes greener, as electrification begins, it already has continues to take off. Silver is going to play obviously an extraordinarily important role.

And we think that when you’re looking at countries that are focusing on climate, when they’re focusing on solar energy, electric vehicles and so forth, it’s solar. I mean, silver is going to have a greater runway than some of the other precious metals because it is a dual metal. It has uses in an industry, anything really that has an on and off switch. There’s some silver contained within. And going back, I believe it was 2011 when the silver price and the gold price were doing really, really well. And silver again got to like 49 in change at the close on a Friday, and everybody has sort of anticipated that the next week was going to take us over the $50 mark. And then that Sunday night, president Obama announced that Osama Bin Laden had been shot, and all of a sudden everybody in the world felt, well, terrorism is over and the risk is no longer there.

Michael DiRienzo: And the gold and silver price suffered as a result. So, the case for silver is strong. It’s been that way for centuries, even more so, today with some of the before mentioned, the uses of silver in the green energy platform. And I think Americans need to realize that we’re not the only country in the world just because our Congress and Senate are looking at ways to reduce incentives for green energy projects, solar panels and homes and so, forth, other countries are ramping up those incentives. So, I think that from the silver point, we think that the silver price has a lot more room to run.

Mike Maharrey: Yeah, I think it’s interesting. You made a really good point. First off, I say this all the time, Americans, we tend to be a little bit myopic, we think, especially when it comes to investing what’s happening in America. And as I have become more and more immersed in precious metals, I’ve realized the impact and the importance of Asian markets and European markets that are out there. So, I think that’s an important, I want to emphasize that point that you made, but I think it’s also, interesting, and I’ve been making this argument, I’m curious to see if you agree with me, but the price of silver tends to be a bit more volatile because of its industrial use and people, so, therefore they’re looking at the trajectory of the economy and the global economy. And sometimes if you have a recession, then that can take a chunk out of industrial demand as demand for stuff goes down. But I’ve argued that because silver is so, integral in the green energy movement and the green energy movement’s not going anywhere, and so, much of it is driven and supported by government and official policy, I would argue that that provides a little bit of support for industrial demand even in the potentiality of a recession. Would you agree with that?

Michael DiRienzo: Absolutely, 100 percent. I think that there are times when government for certain industries, if not all an incentive is great. I remember back in 2004 in the Bush administration, when the house and Senate passed an energy bill and that energy bill included a provision for people to buy hybrid vehicles, you’d get a $2,000 federal state tax write off $700 state level write off. And I went out and bought a Toyota Prius that was in the market for a new car. I mean, I had it for four years or whatever, but I got those incentives for two years. And more importantly, Mike, I was able to drive on the HOV lanes as a single passenger because I have a clean fuel vehicle plate. Now, I took a lot of ribbing from my friends for driving a Prius at first, but I got great gas milage. The car ran like a top, and I got the incentive. So, they do work even with somebody as pigeon headed as I!

Mike Maharrey: Yeah, like I said, we’re developing a theme here. Incentives matter.

Michael DiRienzo: Exactly.

Mike Maharrey: We’ve got solar panels on our house.

Michael DiRienzo: Oh, that’s terrific.

Mike Maharrey: Of course, we’re in Florida, so, it’s an ideal place for solar power. Honestly, the house came with the solar panels, but that’s great. I’m really good. And the guy that put them on the previous owner of the home, the incentives were a big part of that. He got a number of tax write-offs and incentives for installing solar.

Michael DiRienzo: Absolutely.

Mike Maharrey: Along those same lines, I’m curious about this. We hear a lot about the green energy policy and I’m sure that silver is also, very important in the world of defense and military and national defense use. Do you have any sense of just how much silver is used in that? I’m sure it’s not quite as transparent as some things, but

Michael DiRienzo: It’s not as transparent as it once was. In the 1940s through World War ii, up until the end of the 1960s, the US government used to publish those numbers.

Mike Maharrey: Oh, really?

Michael DiRienzo: As did some other governments throughout the world, but it’s rather opaque now. It’s hard to get a handle on silvers use in defense. We think it is significant. We do write about it, not as much as some others do, but we do mention defense and military use in our world Silver Survey, that number is included in our other category. When you’re looking at overall demand, I mean, quite frankly, look at a tomahawk missile guided missiles, drones. They have to have some form of silver. It just wouldn’t operate otherwise. The question is how much, and I don’t have a number, I just don’t have a number. We’d love to have a number that I could present to you and some of the others, but we know it’s being used, they just don’t report on it.

Mike Maharrey: Yeah. Well, it’s better to say, I don’t know than to make up a number. So, I actually appreciate that. Absolutely. I appreciate that answer.

But it is interesting you mentioned the fact that the current administration is not as friendly to green energy as the previous administration, but it does seem like that this administration is pretty intent on wrapping up or ramping up defense spending. And of course, I think you’re going to see a big jump in defense infrastructure in Europe given the dynamics that are over there. So, it’s another interesting thing that could play on that.

Michael DiRienzo: Sure, that’s true.

Mike Maharrey: Well, I really do appreciate you taking time. I know you’re a busy man. Before we go, I do want you to have an opportunity to let folks know where they can find the Silver Institute, and if you’ve got anything really cool upcoming, tell us about that too.

Michael DiRienzo: Sure. So, I mentioned some of the reports we’ll be putting out through the remainder of the year. In six months in November, we’ll be taking a look at the 2025 Silver Market and we’ll issue an interim report on it. We’re looking forward to participating in some of these conferences and so, forth. And one of the great things that we’re seeing more and more people do are podcasts and webinars and so, forth. So, we’re very active in that. But beyond that, you can contact us at our website, silver institute.org. You can sign up for our newsletter there. You can follow us on X and our dedicated page on LinkedIn Silver Institute. And we put out two posts a week on average, on various aspects of the market, whether it be on jewelry, whether it be on silver’s use in electronics or what have you. We even put one out earlier this year on Silver is for Champions. And what I mean by that is that if you look at all the trophies throughout the world for major sporting events, America’s Cup, the Super Bowl, the World Series, the Stanley Cup, of course, they’re not made of gold, they’re made of silver. Silver is champions.

Mike Maharrey: Even gold medals are silver, mostly.

Michael DiRienzo: Even gold medals are silver. Exactly, exactly. We make that point as well. So, yeah, thank you, Mike for this opportunity. I really appreciate it.

Mike Maharrey: Yeah, I really appreciate it, and we love the work that you do. As I’ve already mentioned, I find the information and data that you guys put out absolutely invaluable and it really makes my job a lot easier. So, I appreciate that and appreciate what you’re doing. We definitely love to have you back on as we move into the future and keep people aware of what’s going on in the silver market.

Michael DiRienzo: Anytime. Mike, thanks again for the opportunity.

Mike Maharrey: Alrighty. We have a great day.

Michael DiRienzo: Thank you.