Physical Shortages Could Send Silver Prices Soaring, Says Analyst
Silver prices may be down now, but think long-term. There are a few factors I am closely watching that suggest silver is going to surprise investors in a big way.
This may be bold, but I am not ruling out a silver price of $50.00 an ounce in the next few years. Yes, that’s more than a 200% increase in silver prices.
Industrial Growth to Boost Silver Prices?
You see, oftentimes it is forgotten that silver isn’t just used for investments and making jewelry.
The grey metal has a massive industrial use as well. In fact, the industrial sector is the biggest consumer of silver. To give you some idea, in 2014, the total demand for physical silver was 1.1 billion ounces. Industrials used 594.9 million ounces of silver; simple math will tell you this represents a little more than 56% of entire demand. (Source: Silver Institute, last accessed October 27, 2015.)
Looking at this, one could say that if industrial production improves globally (which essentially means global growth), silver prices go up.
Here’s something you have to keep in mind; as it stands, the conditions in the global economy aren’t great. As a result, silver prices have run into trouble.
The outlook for global growth seems to be improving. For instance, the International Monetary Fund (IMF) expects the global growth rate to be 3.6% in 2016, up from 3.1% in 2015. Year-over-year, the majority of the advanced economies are expected to grow. Emerging markets and developing economies are also forecasted to grow despite China’s economic slowdown. (Source: International Monetary Fund, last accessed October 27, 2015.)
This isn’t all. Central banks around the globe are trying to revive their respective economies. Don’t be shocked if many resort to money printing and lowering interest rates to boost economic growth. This will only help silver prices move higher.
Investors Rushing to Buy Silver
Looking at other demand sources, investments, and jewelry demand, they’re surging.
Consider the sales of silver coins at the U.S. Mint. Year-to-date, the mint has sold 39 million ounces of silver in American Eagle coins. (Source: U.S. Mint Bullion Sales/Mintage Figures, last accessed October 27, 2015.) Silver bullion sales at the Mint are on pace to meet the previous year sales of 44 million ounces.
Also, if you have been paying attention to the premium currently being charged by silver dealers, it tells the idea about demand for the physical metal as well. You are now paying much more for physical silver compared to silver spot prices.
Where’s Silver Headed Next?
Going forward, I remain bullish towards sliver. Please look at the chart below.
Chart courtesy of www.StockCharts.com
Even from a technical perspective; I see bullish sentiment building up. Silver prices now trade above their 50-day moving average and hover close to their 200-day moving average. This suggests the persisting down trend could be changing soon.
I see silver prices to be selling at a massive discount. A few years from now, we could be looking at the current silver price and kicking ourselves on how great of an opportunity the grey precious metal was presenting.