A COVID outbreak is expected to hit the silver mine industry in the United States, as the silver market is set to shrink amid soaring global prices.
Gold, the silver mining industry’s biggest revenue stream, is expected hit by a 50 per cent drop in demand in the next six months.
Silver ore is a vital part of the economy in China and the United Arab Emirates, where the gold price has surged.
Crippling US silver prices are a serious blow to the industry, which relies on the supply chain and export markets to support a booming economy.
The Cripple Silver mine, in Nevada, opened in May 2018 and is expected have about a million ounces of silver in the market by the end of the year.
“We’re going to see a 50-per-cent decline in demand for silver this year and next, so we’re not expecting a massive increase in our sales,” said Mark Fischman, the mine’s director of marketing.
“But I do think we’re going into 2019 with the same sales that we had in the first six months of 2019.”
Gold and silver are the most traded commodities in the world.
But despite the downturn in the silver industry, the mining industry has been able to withstand a drop in global prices, which is set by Chinese authorities.
Cripple said it will likely have a “tremendous” drop in production costs by the time its mines open next year.
Gold prices have risen more than 30 per cent in 2017 as Chinese authorities have tightened control over the price of the metal.
The global gold market, which has been on a tear since Donald Trump became president in January, has plunged 40 per cent this year.
Gold has plunged as the global economy is in a deep recession and the US Federal Reserve has cut interest rates to near zero, causing investors to seek safe havens.
Silver prices have fallen more than 50 per of the value of gold, which are up about 3 per cent over the past year.
The drop in the gold market has hurt the US economy, which saw GDP growth in the third quarter drop 0.1 per cent.
The drop was the biggest since the depths of the financial crisis in 2009.
Silver mining companies are struggling to meet their demand, and Crippled has been forced to raise its wages to cover the losses.
“We’ve been in this position for about a year now,” Mr Fischmann said.
“The silver industry is in deep trouble and we’ve been here for about four years.”
Crippled Silver mines has about 700 employees and is located in the southern Nevada desert.
Gold is still the dominant source of revenue for the silver mines in the US, but the price is going down due to China’s efforts to control the global market for the metal and its influence on the Chinese government.
China has been aggressively pushing the price up and is trying to limit the value and availability of gold.
China is the world’s largest gold consumer, but it is now struggling to control its gold demand as it struggles to boost growth in other sectors.
In December, China announced that it was going to introduce a new currency called the renminbi.
This would give it a powerful tool to control gold prices.