Supply Side Making a Strong Case for Higher Silver Prices
This is a bold statement, but it’s worth making right now: silver prices could skyrocket in 2019. The gray precious metal looks to be selling for cheap and may not remain this low for too long.
The fundamentals of the silver market continue to get better. Basics economics are at play here, and it could lead to massive increase in silver prices.
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The demand in the silver market remains strong, while the supply side is facing a lot of headwinds. This is a perfect recipe for higher prices.
Let’s look at the supply side first.
Consider production from U.S. silver mines. In 2017, U.S. mines produced 1.03 kilograms of silver; in 2018, their production amounted to 923,000 kilograms. This represents a decline of close to 10.4% year-over year. (Source: “Silver Mineral Industry Surveys,” U.S. Geological Survey, last accessed March 27, 2019.)
Keep in mind that the U.S. is the ninth-biggest silver producer in the world.
Then there’s the global figures. Between 2014 and 2017, global silver production, be it through mines or recycling, declined year-over-year. The overall figures for 2018 aren’t available yet, but it wouldn’t be shocking to see another year when production declined.
How’s the supply side outlook going forward? Well, in 2019, we could see the repeat of prior years. Silver miners haven’t spent money on exploration and their costs are too high. If silver prices remain below $15.00, don’t rule out further deterioration in supply.
Demand Remains Strong; There’s a Silver Rush in the Making
Now, paying attention to the demand side.
I don’t think I’d be wrong in saying that there’s a silver rush in the making.
Just look at the solid sales at mints around the world. In the first two months of 2019, the U.S. Mint sold over 6.17 million ounces of silver in just American eagle coins. This marked a year-over-year increase of approximately 48%. (Source: “Bullion Sales,” United States Mint, last accessed March 27, 2019.)
The Perth Mint, the biggest mint in Australia, sold 1.41 million ounces of silver in coins and bars in the first two months of 2019. (Source: “Pace of Perth Mint Gold and Silver Bullion Sales Slows in February,” CoinNews.net, March 25, 2019.)
Watch out for India as well; the country known for gold consumption is building up an appetite for silver. Over the past year, India has imported a lot of silver, and it looks like the trend could continue.
If Silver Prices Break Above This Range, Massive Returns Could Follow
The silver market has been very interesting over the past few years.
There’s a massive disparity between supply and demand, and the prices aren’t moving.
I believe this could be mainly due to the fact that no one cared about the gray metal when the hot tech stocks were showing stellar performances and everything else seem good.
As we head further into 2019, there’s already a lot of noise about a global slowdown, interest rate uncertainty, and so forth.
I will not be shocked if investors start paying attention to the silver market in 2019, get excited about how things have improved over the years, and buy. If this happens, we could see silver prices surging up by a lot.
If silver prices are able to break above the $21.00-$25.00 range in 2019, we could see stellar gains.
