Thread by @aschmidt2930

The #silver market has fundamentally changed due to the Mexican gov's anti-mining rules.

First, remember that according to the @SilverInstitute, silver is already in a 24% supply deficit:

https://twitter.com/goldseek/status/1652991122149367808

So where does supply come from? Mexico.

It's worse than 23% of supply. Most PRIMARY silver mines (not copper mines where you stumble into some silver) are in Mexico.

Silver already had a weak supply response to price due to only 27% of mine supply being primary.

These regulations make new investment in Mexico much less attractive. As the silver price rises,

mine supply is unlikely to move as much as other commodities.

The supply disruptions aren't just in Mexico. Peru has been a disaster, with mine supply down 8.6% in February.

kitco.com/news/2023-04-1…

While it's possible Peru bounces back, it's still a powder keg:

https://twitter.com/PauloMacro/status/1621012147919794177?s=20

A few other supply notes:

- silver mined in China or Russia generally stays there
- investment in Chile may suffer from Lithium nationalization as well. How can a company know silver isn't next?

While the supply hits will likely take years, I believe we're seeing the impact of this in the market today. Why?

If you're an industrial user, you're front running possible supply issues and buying contracts further out on the futures curve.

If you're a smart short, you're covering and reducing exposure here significantly.

My silver thesis from the beginning has been that silver isn't "baby gold" but palladium 2.0 with a monetary call option. In palladium, supply issues and industrial demand overwhelmed the paper markets. I think silver follows this path. Fade the Fed and DXY, IMHO.