With the production of silver shrinking, severely undervalued silver prices could be the next big trade in the making.
Mexico & Canada: Silver Production
Major silver mining countries are reporting falling silver production. In 2016, average monthly silver production in Mexico amounted to 387,465 kilograms, the lowest level since 2012. (Source: “Value and volume production of Silver,” Servicio Geológico Mexicano, last accessed April 4, 2017.)
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Canada, a major silver mining country, saw its silver production contract in 2016, compared to 2015. (Source: “Production of Canada’s leading minerals,” Natural Resources Canada, accessed April 4, 2017.)
What the Chart Says About Silver Prices
As the weekly chart of silver prices below shows, there is a significant amount of bullish sentiment building up for silver.
There are three things worth noting on this silver price chart:
- The 50-week moving average and the 200-week moving average are crossing over each other, with the 50-week moving average at the top and 200-week moving average at the bottom. Technical analysts refer to this phenomenon as a “golden cross.” Usually higher prices follow a golden cross for the next little while.
Chart courtesy of StockCharts.com
- The prevailing downtrend for silver prices is now clearly broken. We are seeing the emergence of a new trend. Since early 2016, we have seen higher highs and higher lows. Remember the most basic rule of technical analysis: the trend is your friend.
- Momentum indicators—namely the moving average convergence/divergence (MACD) at the bottom of the chart and the relative strength index (RSI) at the top of the chart—suggest that buyers are excited, and that they are increasing in numbers. In other words, silver prices could go much higher from where they currently stand.
The Silver Opportunity
Dear reader, over my decades of investing, I have learned one thing: when an investment is down and out, it’s worth a look.
Over the past few years, precious metals, especially silver, have been disregarded by investors. Ignoring them would be a big mistake. Silver prices, as I see it, are very cheap.
With that said, I am paying close attention to the shares of senior and junior silver mining companies. I believe they are selling at bargain prices.
