Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Listen, Silver: We Need to Talk

Commodities / Gold and Silver 2014 Apr 28, 2014 - 06:31 PM GMT

By: Jeff_Clark

Commodities

I wrote to Silver last week, and she answered back. I’d like to share our correspondence with you…

Dear Silver,

Happy anniversary. It was on April 25, 2011 that you hit $49.80 per ounce in the New York spot market.

Today, three years later, you sell for around $20, nearly 60% less.

Is your bear market almost over—or are these low prices here to stay? Your price has lagged gold this year, so your normal volatility is lacking. How much longer will you be stuck?

Jeff Clark, silver investor


Here’s her polite response:

Dear Mr. Clark,

I have good news for you. While some investors have lost interest in me and my price is at 2010 levels, things will soon change.

I put together this historical chart for you, and I hope you’ll share it with your fellow silver investors. It shows every major bear market over the past four decades. The black line represents what’s taken place from April 2011 through last Friday.

Of the seven prior bear markets, four lasted longer and three were shorter. Four declined less than today; two were about the same; and only one was significantly deeper.

If I were to match the two longest bear markets, my price would stay down until this October. If it matched the other two longer bear markets, it would end this summer.

Over the past 40 years, there has been no bear market that would extend my low past this October.

Or my low may already be in.

Either way, I think it’s safe to say that I’m close to the end of my down cycle. In fact, the historical data say the opportunity to buy me at $20 or less will soon be unavailable.

Let me relay some other data to you that also signal current prices can’t last too much longer…

The US Mint (Still) Can’t Keep Up with Demand

The sharp drop in my price in 2013 unleashed a wave of pent-up demand for silver coins. Look at the response from investors.

The question this year is if those record levels could continue to be supported. The first quarter is over, so I can tell you the answer…

The US Mint sold 13,879,000 ounces of me in Q1, 2.4% less than the 14,223,000 sold in the first quarter last year. Here’s the monthly breakdown:

  2013 2014  Gain/Loss
Jan. 7,498,000 4,775,000 -36.32%
Feb. 3,368,500 3,750,000 11.33%
Mar. 3,356,500 5,354,000 59.51%

January’s 36% decline from the prior year looks big, but it’s not what you think: the Mint didn’t begin sales until the end of the second week of the month. The monthly total thus reflects only 2.5 weeks of sales.

And March sales were the fourth-biggest month ever. Add in April’s sales figures and the US Mint is now on pace to exceed 2013 totals.

It’s clear that your fellow investors think my price will go higher.

Silver ETFs Have Net Inflows (Again)

You might remember that silver ETFs’ holdings were largely flat last year, unlike the mass exodus seen in gold funds. The pattern is continuing this year.

Holdings in my exchange-traded products (ETPs) have risen 3.5% year to date, an additional 17.5 million ounces. In fact, the net purchases by silver ETPs have totaled $354 million YTD, the largest influx of all commodity ETPs!

Meanwhile, gold-backed ETPs have seen sales of 500,000 ounces, about a 1% drop.

Jewelers Love Low Prices

Low prices for me have led to increased silver jewelry purchases.

As just one example, the UK reports that silver jewelry sales jumped 40.4% in February, to 351,791 items.

India Just Won’t Stop Buying

India imported 5,500 tonnes of me last year, 180% more than 2012. Imports comprised 20% of all global demand.

Last month’s silver imports were 250% lower. This was mostly due to the recent increase in import duties, and the fact that six banks got permission to import gold, which would soften purchases of me. This could partly explain why my price has struggled.

But as long as politicians keep gold restrictions in place, Indians will keep buying me.

China: More Silver for Solar

Chinese imports of me rose drastically in February, up by 75% month on month and 90% year on year to 358 tonnes, the highest since March 2011. Though lower the following month, March imports were up 16% year over year.

China’s solar industry is growing explosively. In 2009, it represented about 0.2% of the global market; this year, it’s estimated to be one-third.

It’s interesting to note that my price rose in February and fell in March, which suggests that Chinese demand affects my price, too.

Supply Sources Are Concerning

So far, suppliers have managed to meet demand. However, there are dark clouds on the horizon…

  • Very little excess supply is expected this year, as production is projected to remain flat, and demand for me shows no signs of letting up.
  • Solar power accounted for 29% of added electricity capacity in America last year. “More solar has been installed in the US in the past 18 months than in 30 years,” says the US Solar Energy Industries Association. “Eventually solar will become so large that there will be consequences everywhere.”
  • Supply from recycling will probably be weak, because it’s not cost effective to recover every tiny bit of me from cellphones or prescription eyewear or casino chips. One report says that Americans threw away 130 million cellphones last year, containing over 46 tonnes of me.
  • Several major base-metals mines are expected to be depleted over the next several years. The problem is that two-thirds of me is a byproduct from base-metals operations—if their output falls, there will be less of me, as well.
  • The Silver Institute says that demand for industrial products made from me continues to grow.

No Regrets

As I look at your current situation from a historical perspective, I see a lot of catalysts that will catapult my price higher in the near future. It seems rather clear that as demand continues to grow, supply tightens, and my role as money grows more substantial, I will trade at much higher levels in just a few short years.

In fact, I offered to bet my cousin gold that I will outperform him before this cycle is over. He declined to take the bet.

The clock is ticking. Don’t set yourself up for regret when my price leaves $20 in the dust.

Your friend,

Silver

P.S. Learn about the three best ways to invest in silver, where and when to buy physical silver, and how to find the best silver stocks, in the free 2014 Silver Investor’s Guide.

The article Listen, Silver: We Need to Talk was originally published at caseyresearch.com.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in