While the recent decline in gold prices has been very well covered by seemingly every financial news media outlet in recent months, the decline seen in silver prices has garnered much less attention. Silver, like gold, has been on the defensive as the Federal Reserve prepares to hike interest rates for the first time in years and as stocks and the dollar march higher.
Unlike gold, silver has many industrial uses-thousands of them-that put the white metal into a somewhat unique position. Silver has the potential to not only rally based on investment or safe-haven demand, but also has the potential to rally based on an improved economic outlook.
Currently, many investors are buying as much silver as they can get their hands on.
Evidence of this was seen in recent weeks, as the U.S. Mint was completely SOLD OUT of American silver eagle coins…
In our view, silver is a bargain at current levels and these levels will likely not be sustained for much longer.
Those involved in silver mining and the precious metals industry had expected silver prices to firm up in the coming years, as demand remains strong.
That may come much sooner rather than later, however…
Silver is already beginning to enter a supply crunch.
With the decline in silver prices in recent months, the silver market is likely on the verge of a significant reversal in price.
Simona Gambarini, a commodities economist for Capital Economics, stated on Friday that: “WE have argued before that silver mine production had reached its peak and was going to decline over the next few years. However, the recent slump in precious and industrial metal prices might accelerate this process.”
That’s because silver is often mined as a byproduct of copper, gold, zinc and lead. According to Gambarini, 70% of silver production in 2014 came as a byproduct of other mining activities. The plungein commodity prices in other metals is translating into a cut of Capital spending by miners, which in turn means lower output.
Over supply has played a role in silver’s downturn. Expect that over supply to change to under-supplies in the coming years, which in turn should drive prices higher.
Gambarini’s firm expects to see a 1 percent decline in silver output this year, which could drive prices up to $18.70 per ounce.
Spot silver prices were trading around the $14.74 per ounce level in late action Friday. A jump to $18.70 before the end of the year would mean an increase of over 26 percent in just the next few months.
Gambarini went on to state that the top 15 primary silver mines are showing a three percent year-over-year decline in output for the first half of the year. In addition, output from the two largest silver producers, Peru and Mexico, has also started to decline.
Let’s think about this for a moment…
Less supply with higher demand = higher prices.
The very basic laws of supply and demand at work.
If the Fed is right, and the economy is in fact getting stronger, silver stands to potentially benefit from increasing industrial demand.
If the Fed is wrong, and the economy is set up for another downturn, silver stands to benefit from safe-haven demand and risk aversion.
In other words, when it comes to silver, it almost seems as if you cannot lose…
Could silver prices go lower? Absolutely. Could silver trade sideways for a period of time? Sure.
Looking at a silver chart one thing is abundantly clear, however.
There is a lot more upside potential than downside potential at current prices.
The only question you need to ask yourself right now is this: Do I want to buy silver at under $15.00 per ounce or would I rather buy it at $30, $50 or even $100 per ounce?
The choice is clear…
Don’t wait until the supply crunch takes further hold. We recommend adding to silver holdings right now at current levels. If you don’t own silver already, now is the time to begin building a stash.
Fortunately, it has never been easier to add silver to your portfolio than it is today. A silver backed IRA is a great place to start….
Please reach out to our experienced precious metals executives with any questions that you might have about investing in silver and the process of setting up a silver IRA. Call us today at 1-800-341-8584 FREE to get started.