Depressed Silver Prices Presenting Bigger Opportunity Than Gold?

Silver Prices Presenting Bigger Opportunity Than GoldAs prices for silver and gold started falling in 2013, my prediction was that lower prices for the precious metals would cause miners to cut back on the exploration and development of new mines, eventually stunting supply. And that is exactly what has happened. In the case of silver, the cutback on supply has been significant.

Production of silver from mines in Canada, a major silver-producing country, is collapsing.

In 2014, mines in Canada produced 492,871 kilograms (kg) of silver. In 2013, this figure was 645,976 kg of silver. Production at silver mines in Canada declined by 24% last year. (Source: Natural Resources Canada, last accessed February 18, 2015.)

Demand for Silver Skyrocketing

Looking at the demand side of the silver equation, I am truly impressed as the demand for silver continues to rise.

Within the entire year of 2014, the U.S. Mint sold about 44 million ounces of silver in American Eagle coins—the record amount of silver coins the Mint has ever sold. (Source: United States Mint, last accessed February 18, 2015.)

So far this year, demand for silver at the U.S. Mint has increased further. In January of this year, the Mint sold 5.53 million ounces of silver in coins; that’s 16% more than it did in January of 2014, when it sold 4.77 million ounces of silver in coins. (Source: Ibid.)

And we are seeing a significant amount of silver demand from the country known for its appetite for gold—India. In January, India imported $381.27 million worth of silver. In the same period a year ago, it imported only $295 million worth of silver—a year-over-year jump of 29% in demand. (Source: Indian Ministry of Commerce & Industry, last accessed February 18, 2015.)

The Outlook for Silver

Going forward, I am optimistic on silver prices. I believe silver prices will surprise investors to the upside in 2015. The supply of silver from silver mines is declining, while demand is rising. In normal economic times, this relationship would result in higher prices. But just like the increasing “noise” about manipulation in gold prices, I believe there’s something going on in the silver market, too. But how long can the scam go on before the natural forces of demand and supply regress back to the mean?

I see the depressed stock prices of quality silver-producing companies as a bargain. Investors should look at the decline in precious metal prices as a blessing in disguise.