Demand and Supply Suggesting Soaring Silver Prices
If there’s one asset that’s really worth paying attention to, its silver prices. The gray precious metal seems to be trading at an attractive price and could soar significantly. This may sound bold but it could be the next big trade in the making.
Why could this be?
Advertisement
The very core fundamentals of the silver market continue to improve in favor of those who are bullish—the supply side continues to get crushed, while demand is soaring and could increase immensely.
Supply Side Struggling
As it stands, we are seeing silver production take a severe hit.
For example, take the U.S. In the first five months of 2017, U.S. mines produced 470,000 kilograms of silver. (Source: “Silver In May 2017,” U.S. Geological Survey, last accessed September 25, 2017.)
In the same period a year ago, mine production of silver was 482,000 kilograms. (Source: “Silver In May 2016,” U.S. Geological Survey, last accessed September 25, 2017.)
Simple math here; silver production in the U.S. declined close to 2.5%.
Don’t for a second think the U.S. is the only place where mine production is decreasing. We are seeing this across several other silver-producing regions as well.
For instance, silver production in Mexico is expected to contract. Don’t forget, Mexico is hands down the biggest silver-producing region in the world.
Also, look at the bigger picture; over the years, silver mining companies have cut back on exploration spending and have instead reached for higher grades as silver prices have remained low. So, going forward, it shouldn’t be surprising if production tumbles severely and costs to produce rise.
Demand for Silver Seems to Be Soaring
As for demand, it’s nothing but stellar.
First, know that silver is usually considered an alternative to gold. Currently, there are many reasons to own gold. For example, the U.S. could be entering into a war with North Korea, there’s interest rates uncertainty, U.S. national debt is soaring, uncertainty in the global economy remains prevalent, and the list goes on.
As demand for gold increases, we could see a rush towards silver as well.
Then, know that those who generally were big gold buyers are building up an appetite for silver. India and China, over the past several months, have been importing immense amounts of silver.
Last but not least, know that silver is used in technology. It is used in cell phones, computers, solar technology, and many other places. And the use of technology is increasing. So this sector could be a using a lot more silver than it already does.
To provide some perspective, according to Gartner Inc (NYSE: IT), a technology research and advisory firm, shipments of smartphones are expected to increase five percent this year to 1.6-billion units. (Source: “Gartner Says Worldwide Device Shipments Will Decline 0.3 Percent in 2017,” Garner Inc, July 5, 2017.)
If we assume roughly 0.34 grams of silver is used in an average smartphone like an “iPhone,” then smartphones alone could be using a lot of silver—roughly 544,000 kilograms or 544 tonnes. (Source: “Your phone is full of untapped precious metals,” BBC, October 18, 2016.)
Silver Prices Outlook: Those Who Ignore It Could Be Making a Mistake
Dear reader, just by looking at the most basic fundamentals, I can’t help but be bullish on silver prices ahead. I see silver prices at $50.00 an ounce in the next few years…much sooner than anyone thinks. I have said it several times here before and I will say it again; those who are ignoring silver could be making a grave mistake.
Also, I am paying close attention to silver mining companies. There are some mining companies that are still presenting a great opportunity. Over the period when silver prices were tumbling, they were focused on improving their operations. If silver prices soar, those companies could show amazing returns. Obviously, with time we will know more.
