Strong Demand Bullish for Silver Prices
The silver prices outlook for 2016 looks great. The gray precious metal remains severely undervalued and could see a massive move to the upside in the New Year.
To see where silver prices are going next, investors should be looking at the most basic fundamentals of the silver market: supply and demand. To read about where the supply side is headed, see “Precious Metals: Silver Prices Poised to Skyrocket in 2016.”
On the demand side, there are some astonishing developments. Sadly, there’s so much pessimism towards the precious metal that you don’t really hear much about it in the mainstream.
Silver Coin Sales Surging
Look at sales at the U.S. Mint as just one of many examples.
Consider this: year-to-date, the U.S. Mint has sold 47 million ounces of silver in American Eagle coins. This is the highest amount of silver sold in a year at the U.S. Mint on record! You know what’s even more interesting? In mid-2015, the Mint halted sales of silver coins because it ran out. (Source: U.S. Mint web site, last accessed December 22, 2015.)
If coin sales at the U.S. Mint weren’t enough, then look at what’s happening in the Indian market. India is known for its demand for gold. If you look closely at its import figures, you will find than the biggest gold consumer in the world is developing an appetite for silver. Don’t overlook this whatsoever.
In the month of August alone, $363.41 million worth of silver was imported into the country! Mind you, over the past year, we have seen silver imports into India see a solid increase. (Source: “Quick Estimates for Selected Major Commodities for August, 2015,” Ministry of Commerce and Industry web site, last accessed December 22, 2015.)
I will not be surprised if a few months down the road, we find that India didn’t only import a massive amount of gold, but a huge amount of silver as well. If we assume that, on average, the country imported $150 million of silver each month, it would amount to more than $1.8 billion. This demand could be major for the silver market.
Remember that back in 2013, when silver prices witnessed major declines, we were told the buyers would eventually run away? The same narrative continued in 2014 and 2015, too. Those who said this were all wrong. We are seeing the complete opposite—the buyers remain and silver demand is strong.
Silver Prices Outlook for 2016
Too often, too many investors forget that the silver market is very small relative to the stock market, the bonds market, or even the gold market. With demand shooting, and the supply (as explained in my previous post) declining, basic economics say higher prices are ahead.
When will silver prices start to move higher? Don’t rule out 2016 to be the year when the markets start to care about fundamental developments and silver prices start to move to the upside.
Despite the negativity, I continue to closely follow the mining sector. Mining companies could help in providing leveraged returns when silver prices move the upside.