Silver Prices to Soar on Back of Increasing Demand And Dismal Supply
It can’t be stressed enough; silver prices shouldn’t be ignored. The gray precious metal could provide immense gains in the coming months and years.
In the silver market, we see a basic economic problem developing; there is increasing demand for the precious metal, but the supply side is struggling. Even an amateur economist will tell you that this is a perfect recipe for higher prices.
For demand, just look at the amount of silver being imported into India, or silver sales at mints around the world. Saying it in simple words, it looks like there’s a “gold rush” in the silver market.
Silver Miners Struggling to Produce More
When you start paying attention to the silver supply side, there’s a struggle. Silver mining companies are reporting lower production. Know that during the sell-off in silver prices back in 2013, 2014, and 2015, silver mining companies reached for the ground that had the highest concentration of the metal.
Now, they are left with not-so-great ground.
Take Hecla Mining Company (NYSE:HL) as one example. In all of 2017, the company produced 12.48 million ounces of silver. In 2016, its silver production was 17.17 ounces. This represents a decline of over 27% year-over-year. (Source: “Hecla Reports 12.5 Million Ounces of Silver and 232,685 Ounces of Gold Production in 2017,” Hecla Mining Company, January 10, 2018.)
Look at First Majestic Silver Corp. (NYSE:AG) as well. In 2017, the silver producer produced 9.74 million ounces. A year earlier, this amount was 11.85 million ounces. Simple math; production at First Majestic Silver declined by close to 18%. (Source: “First Majestic Produces 16.2M Silver Eqv. Oz in 2017 (4.1M Silver Eqv. Oz in Q4); Announces 2018 Production Outlook and Cost Guidance,” First Majestic Silver Corp., January 16, 2018.)
Lastly, look at Pan American Silver Corp. (NASDAQ:PAAS), another well-known silver producer. In 2017, it produced 25 million ounces of silver. In the entire year of 2016, the company produced 25.4 million ounces of silver. (Source: “Pan American Silver Announces Preliminary 2017 Operating Results Provides Guidance for 2018 and Three-year Outlook,” Pan American Silver Corp., January 11, 2018.)
Silver Producing Regions Reporting Declines in Output
Don’t get too fixated on the companies’ production figures. We see entire silver-producing regions reporting dismal production figures.
Consider Canada, for example. In the first 10 months of 2017, silver mine output amounted to 319,776 kilograms. In the same period a year ago, this amount was 335,244 kilograms. This means silver mine production in Canada declined by 4.61% year-over-year. (Source: “Production of Canada’s Leading Minerals for October 2017,” Natural Resources Canada, last accessed January 17, 2018.)
Silver Prices Outlook in 2018: Investors Could Reap Massive Rewards
Dear reader, if there’s one thing I have learned over the years, it’s that at times, investors ignore fundamentals, but in the long run, they matter a lot.
Silver prices are down and suppressed these days because other assets like stocks are doing great. Once the fundamentals of the silver market start to matter—and I believe this will happen sooner than later—you could see skyrocketing silver prices in no time.
In the meantime, I am paying a lot of attention to silver mining companies where silver production is increasing, and they are spending a lot of money on exploration. I believe they could provide investors with massive rewards once silver prices start to move higher.