The gold silver ratio (GSR) has set a new 100 year record, with the value of 1 ounce of gold exceeding over 115 ounces of silver.
I would suspect that the drop in silver is largely due to the global slowdown that we are currently facing from the Coronavirus, as silver is predominantly an industrial metal, given that this slowdown is far from over then the logical conclusion would be that silver's move to the downside is not yet over.
This means that despite the GSR being in excess of 115, then higher levels are entirely possible, and are in fact likely.
This comes on the back of silver making intraday lows, below that of the 2015 lows around $13.65, with silver touching $12.70, this means that we could be seeing silver in the single digits in the not-too-distant future, particularly if the global lock-downs continue.
That being said, we are likely to see some enthusiastic buying at these levels from precious metals investors, particularly with the GSR at these levels.
So a bounce is possible, although i do see lower nominal silver prices going forward, the GSR however, may not display the same one sided move.
There a number of problems with your theory:
1) there are numerous large mining companies that have shut down their mines due to COVID19
2) physical silver is quite scarce...and the premiums for American Eagles is expanding as well as the wait time of 12-16weeks
3) is silver is in such low demand why the problem with physical silver?
1) Yes there are many mines shutting down, this will have upward pressure on the supply side for both gold and silver, so supply will affect both, the issue is demand, Gold is still the more in demand Monetary metal, we can clearly see that with the correltation with other "safe haven" assets, like the US10Y. Supply chains are shot at press time the industrial demand for Silver has diminished greatly.
2) Yes the premiums for Silver Eagles and other bullion is quite high, the same is said for Gold, a possible explanation (which is unsubstantiated so take it will a grain of salt), is the combination of the high GSR and the future lack of supply from miners has driven BOTH monetary stackers and industrial entities to seek out an already small supply of Silver. It is also worth mentioning, that the premiums on Silver itself is not especially high everywhere, it greatly depends on the product, such as eagles, this would suggest that it is primarily the Silver stackers driving the premiums up, most likely in response to the GSR.
3) I am not saying Silver is inherently in low demand, i am saying the industrial component is in lower demand, which is the lion's share of demand, it is also worth noting that the stackers and industry are at odds with regards to desired outcome, stackers want a rising silver price, whereas industry want a lower input cost of production.
Also to your point around the impact of Covid19, i would not automatically assume that the pandemic will cause a spike in Silver due to stacking, although it can not be ruled out, the highest demand products are not Silver bullion, they are toilet paper, food, long-life milk, soap and hand sanitizer.
I do 100% agree with the thesis for higher silver prices, but i also think that the demand surge will materialize in Gold first, which as a trader i must point out.
Now, as a advocate for precious metals, i am accumulating Silver at these levels, also with the view that the GSR can quite possibly climb higher.
1) there are numerous large mining companies that have shut down their mines due to COVID19
2) physical silver is quite scarce...and the premiums for American Eagles is expanding as well as the wait time of 12-16weeks
3) is silver is in such low demand why the problem with physical silver?