Is silver undervalued, widely ignored, and intriguing?
Are these price levels the opportunity that precious metals investors have been waiting for? Is the time now?
For many so-called “silverbugs” the answer is “yes.”
SILVER PRICES ARE LOW
Predicting price movements is not a smart thing to do, because you’re probably going to be wrong. But there is a lot of data which can suggest overarching trends to help you decide your next course of action.
Silver right now is selling for less than 50% of its 2011 high of about $49. Yet, nobody is talking about silver. The devil’s metal does not get the media attention gold does. This might be a buying signal.
Prices for silver fell in the wake of the US election presumably on the assumption that Republicans would introduce more responsible fiscal policies. This assumption is flawed as Republican policies are not that much more “fiscally responsible” than Democrats. They don’t spend less. They just spend differently.
Fiat printing is the status quo for many nations, not just the US, as Japan recently announced their own QE, Europe debates their own, and generally many nation’s have embarked upon their own money printing policies.
Governments are printing more money than ever before, and there are no currencies in the world tied to gold or other standards than fiat.
Inflation has been an issue for decades in the US, and the phenomenon does not see to be slowing as inflation-adjusted prices have not adjusted to the new norm.
Production margins are very low in silver, as producers are reducing costs by cutting employees or even ceasing metal sales.
The silver price is at its lowest level since 2005 relative to the cost of production. These tightening margins spell an unsustainable situation and silver prices must increase or the entire silver mining industry faces bankruptcy.
Current levels of bullion held as exchange-traded products (ETPs) are very low. This is relevant as these investors have been net buyers since 2005 and have kept the metal off the market. Remaining amounts of inventory is 241 million ounces, only 25% of one year’s supply – whereas in 1990 it represented roughly eight times supply.
Falling silver prices has led global consumers to purchase silver coins and bars at a staggering rate as the metal has not been cheaper relative to gold in more than five years.
Retailers have claimed massive and increasing buying interest in recent days as the metal slid towards its lowest since 2010 headed into this past weekend.
Silver had fallen to 4 and-a-half year lows by Wednesday. It had decreased 21% this year to that point.
“We have seen a significant uptake in demand for silver in recent days, both for coins and for 1,000 ounce bars,” Mark O’Byrne, research director of bullion dealer GoldCore, said.
“Silver Maples are being snapped up by U.S. and Asian buyers as the premiums are lower than for silver Eagles. Silver Philharmonics continue to be popular in Europe as they too are cheaper than Eagles, with a similar premium to Maples.”
With an ounce of gold now equaling 74 ounces of silver, the spread has not been higher since early 2009.
“Supply of silver from some mints has been delayed,” said Brian Lan, managing director of Singapore-based retailer GoldSilver Central.
The US Mint sold 1.4 million ounces of silver American Eagle coins on Friday. This marks the highest daily sales since the new 2014-dated coins were first available on January 13.
Due to the tremendous demand, the US Mint sold out of American Silver Eagles last week.
The announcement came in a statement to the biggest US coin wholesalers. The Mint will advise when inventory becomes available. The Mint has not made the announcement available to the public.
Prices in silver could remain soft as the US dollar remains strong, but if there is one thing for sure, the US government will continue having problems paying down its debts, and this will reflect poorly on the dollar. Already many nations have lost copious amounts of faith in the US dollar, and it is likely this trend will only continue.