Disparity in Silver Market Could Send Silver Prices Soaring
Silver prices are one thing that investors shouldn’t ignore. The gray precious metal is undervalued, and could reward immensely in 2019 and beyond.
There has been a disparity in the silver market for few years now, and this could result in a major appreciation in silver prices. This is a bold statement, but don’t be shocked to see silver soar to $50.00 an ounce within a few years.
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Understand this: the supply side of the silver market is struggling while the demand for the metal remains strong. This is the perfect recipe for higher prices. Mind you, this isn’t just for 2019; we have been seeing the silver market reporting a deficit—more demand than supply—for the past few years.
Silver Miners Reporting Low Production
Looking at the struggling in the silver market’s supply side, Fresnillo Plc (OTCMKTS:FNLPF, LON:FRES), one of the biggest silver miners in the world, reported a year-over-year decline of close to 15% in silver production in the first quarter of 2019. (Source: “Mines In Operation,” Fresnillo Plc, last accessed July 3, 2019.)
Why did production decline during the quarter? The company blamed it on lower grades in the ground.
Here’s the thing: Fesnillo isn’t the only company reporting lower production and blaming it on lower grades. Across the sector, we see silver mining companies say this.
Why? You see, in the midst of a sell-off in silver between 2013 and 2015, miners really pulled back on exploration. Keep in mind, exploration is investment in future production.
They didn’t start back spending until early 2017, so it’s possible that this struggle among miners will continue for a bit.
Major Producing Regions Report Dismal Production
Overall, silver production figures have been taking a hit.
Look at Canada’s silver mine production, for example. In the first four months of 2019, silver mine production in Canada amounted to 129,717 kilograms (285,979 pounds). In the same period a year ago, this figure was 136,635 kilograms (301,226 pounds). (Source: “Production of Silver,” Natural Resources Canada, last accessed July 3, 2019.)
Simple math: Canadian silver mine production dropped by more than five percent year-over-year. Keep in mind, Canada is the 11th biggest silver producer in the world.
But Canada isn’t the only major silver-producing nation reporting struggles on the supply side.
Don’t ignore Mexico; according to data compiled by CEIC, Mexican silver mine production actually declined between 2017 and 2018. Mexico is the biggest silver producing nation.
In 2018, the country produced 6,100 metric tons of silver. A year earlier, silver production was 6,110 tons. (Source: “Mexico Silver Production, CEIC, accessed July 3, 2019.)
Why Be Bullish on Silver?
Dear reader, looking at the supply side, I can’t help but be bullish on silver. At around $15.00 an ounce, silver looks undervalued.
We are already seeing gold prices move to the upside. Silver tends to play catch-up with gold over time. So it’s possible that we will see silver prices surge sooner rather than later.
In the coming years, it wouldn’t be shocking to see silver outperforming gold by a large margin.
In the midst of all of this, it might be a good idea to pay attention to silver mining companies. Their shares continue to sell for dirt cheap. As silver prices move higher, silver mining stocks could skyrocket.
