Silver Prices Could Soar on Soaring Demand And Dismal Supply
There’s one asset that investors shouldn’t overlook: silver. The most basic fundamentals of the gray precious metal continue to improve, and this could mean massive increases in silver prices.
The mainstream is really failing to tell the whole story, but know that the demand for silver continues to soar, and the supply side is getting crushed. Economics 101 here: This is the perfect recipe for skyrocketing prices.
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To provide some perspective on the demand side, look at the mint sales around the world. It seems there’s a silver rush in the making.
Consider this: In June, the U.S. Mint sold 986,000 ounces of silver in American Eagle coins. In July so far, the Mint has already sold 2.22 million ounces of silver. (Source: “2017 American Eagle (Sales totals by Month),” U.S. Mint, last accessed July 27, 2017.)
Simple math here: Just month over month, the demand for silver at the U.S. Mint soared 125%.
But, the U.S. Mint isn’t the only place where we see a silver rush.
In June, the Perth Mint sold 1.21 million ounces of silver. This was the highest level since January, and 46% higher than May of 2017! (Source: “Perth Mint Bullion Sales Slow in First Half of 2017,” CoinNews.net, July 14, 2017.)
Major Silver Producers Struggling to Produce
On the supply side, we see the conditions are dire.
Know that with silver prices in the $15.00 – $16.00 range, a lot of miners can’t produce profitably.
Not surprising at all; we are seeing companies report lower silver production.
Consider First Majestic Silver Corp (NYSE:AG)—one of the well-known silver miners. In the second quarter of 2017, the company produced 2.28 million ounces of silver. In the same period a year ago, First Majestic Silver produced 2.84 million ounces of silver. This represents a decline of close to 20% year-over-year. (Source: “First Majestic Produces 3.9M Silver Eqv. Oz in Second Quarter,” Fist Majestic Silver Corp., July 11, 2017.)
Look at the giant players in the silver market as well, KGHM Polska Miedz SA (WSE:KGH)—one of the biggest silver producers in the world. In the first quarter of 2017, the company reported flat production, amounting to 298 tonnes compared to 299 tonnes a year earlier. (Source: “Stable production and sales of payable copper, with higher consolidated sales revenue,” KGHM Polska Miedz, May 5, 2017.)
You see, as silver prices crashed between 2013 and 2015, silver mining companies reached for the highest grades that were easy and cheap to extract. Over the same period, they also cut back on their exploration spending. They find themselves in a place where they have silver in the ground, but it’s expensive to extract. Don’t forget, it’s a problem now, and it’s going to create major production problems in the long run.
Silver Prices Outlook: Do We Have a Bull Market in the Making?
Dear reader, despite silver prices dropping from their peaks, they remain positive for the year. For the rest of the year, it wouldn’t be shocking to see prices remain stable and end on a positive note.
If this happens, it will be the second year when silver prices increase. With this, I really question if we are seeing a bull market in the making.
Remember, if what we see is the start of the bull market in silver, know that these prices won’t remain for long. If you look at previous bull runs in the silver market, as time goes on, the moves to the upside are usually amplified.
I reiterate, ignoring silver could be a big mistake.
