Declining Silver Supply Making Solid Case for Skyrocketing Silver Prices
Silver could be the next big trade in the making. There’s a looming shortage in the silver market, and it could result in a massive increase in silver prices.
A little background first…
Advertisement
In 2011, silver prices traded close to $50.00. By 2015, silver was trading below $15.00 an ounce. This represents a decline of 70% from the highs.
This took a heavy toll on silver mining companies, and rightfully so. They had become too comfortable when the times were good. Their cost of production shot through the roof while silver prices were moving higher.
With prices declining 70% in a very short period, they found themselves fighting for survival. They tried to reach for the so-called low hanging fruit, the extracted silver that was easiest to take out. They cut back on exploration and shut down operations where costs were too high.
Fast forward to now…
The silver supply side has crumbled severely; miners have created a great situation for silver bulls.
Silver Production Declining Across Major Producing Regions
We have been seeing silver production decline across the major silver mining regions.
Consider that in the U.S., in 2017, 1.03 million kilograms (36.33 million ounces) of silver was produced from mines. In 2016, this figure was 1.15 million kilograms (40.56 million ounces). This represents a decline of over 10% annually. (Source: “Silver In December 2017,” U.S. Geological Survey, last accessed April 16, 2018.)
In Canada, silver production faces scrutiny as well. Mine output amounted to 393,483 kilograms (13.87 million ounces) in 2017. In 2016, this amount was 404,666 kilograms (14.27 million ounces). This represents a decline of 2.7% year-over-year. (Source: “Production of Silver,” Natural Resources Canada, last accessed April 16, 2018.)
Don’t for a second think that silver production is only declining in the U.S. and Canada. We see this across all major silver-producing regions.
According to the World Silver Survey 2018, global silver output declined by 4.1% in 2017 to 852.1 million ounces.(Source: “World Silver Survey 2018,” The Silver Institute, last accessed April 16, 2018.)
What’s Next for Silver Prices?
Dear reader, the mainstream media won’t tell you this, but the demand for silver remains very strong.
Consider that, between 2013 and 2017, there was a deficit in the silver market. This means there was more demand than supply. In 2017, the total supply was 991.6 million ounces. Demand was 1.01 billion ounces. That’s a deficit of 26 million ounces!
Here’s the thing: we are also seeing the emergence of a major silver buyer: India. The country known for its hunger for gold has also been buying a lot of silver.
Just look at India’s silver import figures. In March, $267.33 million worth of silver was imported to the country. This was about 31% higher than in the same period a year ago. Also in March, the amount of gold imported to India declined 40.31% year-over-year. (Source: “Quick Estimates For Selected Major Commodities For March 2018,” Government of India Ministry of Commerce And Industry, last accessed April 16, 2018.)
Keeping the demand and supply situation in mind, I can’t help but be bullish on the gray precious metal. It’s setting up to reward big-time.
In a couple of years from now, we could be looking at silver prices and saying, “Wow, silver was trading for cheap!” Silver prices could make a solid run toward $50.00 this year and the next.
