Where Are Silver Prices Going Next? Extreme Pessimism Prevails
Are silver stocks about to bottom? This is the question that’s on every precious metal investor’s mind these days.
With my job, I am fortunate enough to go to precious metal and mining conferences around North America. This week, I am at Silver Summit, organized by Cambridge House International and Katusa Research. This is the first time I’m attending this conference in San Francisco, but it has been going on for several years.
I go to conferences like these to see the sentiment of investors, companies, and those who are close to the precious metals industry, be they analysts, fund managers, or service provides. This conference was focused towards silver and silver mining companies.
At the conference, I spotted a few things that shouldn’t go unnoticed and they are major signs of silver prices bottoming soon for contrarians. A few of my observations follow.
Every precious metal conference I have been to, you would hear estimates about where gold and silver prices are headed from speakers. For example, back when silver prices were trading around their highs in 2011, you would easily hear that the gray precious metal could go to $100.00 an ounce multiple times a day. At this conference, I did not hear any outright optimistic estimates on where silver prices are headed next. In fact, of all the lectures I sat through (so far), no one had anything good to say about silver prices for the next 12 to 18 months!
When the market is hot, at conferences like this one, you see investors flocking towards mining companies’ booths to get more information about why they should invest. At this conference, I didn’t see this. The exhibit hall was very slow. Even when it came to the biggest names that are currently selling for literally pennies on the dollar, I didn’t see them get much attention from investors.
On an interesting note, what was the busiest spot in the entire conference? It was one gold and silver dealer that was actually selling physical precious metals.
Looking at all this, here’s what I can say: investors are pessimistic towards silver stocks. No one wants to say where the gray precious metal is headed next.
With this in mind, remember Sir John Templeton’s view on when bull markets are born? He is known for saying that the time of extreme pessimism is usually the best time to buy and the time of extreme optimism is the best time to sell.
I have never been a fan of predicting tops and bottoms. But, looking at the pessimism among investors, I believe we may be nearing a bottom soon. Could it be today or by the end of this year? I can’t tell, but I believe it’s coming.
Are Silver Prices About to Bottom?
I continue to pay attention to major silver mining companies that are actually producing the gray precious metal. They are selling at a severe discount, as they are becoming fundamentally strong, their costs are declining, and their production is increasing, with many also seeing increasing cash flow. When the silver prices turn, don’t be shocked to see these companies provide solid returns.