Strong Demand Despite Flat Silver Prices
Silver prices didn’t really start 2016 on solid ground, but don’t be discouraged just yet. The demand for the gray precious metal remains solid, and it could take silver prices significantly higher.
When looking at the price of silver, take a good look at the data. Don’t pay much attention to the noise surrounding the precious metal. Each day, there’s significant evidence in the data that suggests that silver buyers are increasing.
Consider the recent actions of the U.S. Mint. On January 11, the Mint set the first weekly allocation of American Eagle silver coins at four million ounces. This was four times the amount it rationed in the last five months of 2015! (Source: “U.S. Mint quadruples American Eagle silver coin allocation,” Reuters, January 11, 2016.)
In simple words, the U.S. Mint expects robust demand for silver in January at least—four million ounces in the first week already.
To give you some perspective on where we stand, as of January 11, the first day of sales, the U.S. Mint has sold 2.75 million ounces of silver in American Eagle coins. (Source: “Bullion Sales/Mintage Figures,” U.S. Mint, last accessed January 12, 2016.) In the entire month of January 2015, the Mint sold 5.5 million ounces of silver in American Eagle coins. We are already halfway to last year’s January total and we’re just one day into January 2016 silver purchases.
If this wasn’t enough, then look at silver sales at Australia’s Perth Mint, one of the biggest in the world. In the entire year of 2015, the Perth Mint sold 11.59 million ounces of silver. This was 52.2% higher than it sold in 2014, which came to 7.56 million ounces of silver. (Source: “Perth Mint Silver Sales Surge in 2015,” Coin News, January 12, 2016.)
At the very core, these data figures are telling us that silver buyers want more. Over the last two years, we are told over and over again that as silver prices remain suppressed, buyers will run out. This is yet to happen.
Technical Analysis: Silver Prices Finding a Bottom?
From a technical analysis perspective, there’s light at the end of the tunnel. Pay attention to the trend lines drawn on the chart below.
Chart courtesy of www.StockCharts.com
Throughout 2015, silver prices declined. If you look at the trading ranges, they got smaller. This is a sign that volatility in silver prices has declined. It also says that sellers weren’t as strong as they were in the previous two years.
Above all, the chart slightly hints at the possibility that a bottom may be nearing. Obviously, time will tell.
Silver Prices Outlook 2016: Optimistic
Beginning 2016, it would be very wise to ignore the noise and pay attention to the data on silver. When I do just that, I see silver prices trading at a very cheap valuation. The most basic fundamentals, demand and supply, suggest that the precious metal could skyrocket.
It’s just matter of time until it all comes into play, dear reader. I am still optimistic and for my perspective to change, buyers will have to decline and the supply side will have to flourish. As it currently stands, neither of these two phenomena is occurring.
Here’s something I have learned over the year: in times of the most uncertainty, you find the best opportunity. With silver prices down and facing severe pessimism, I am paying attention to mining companies. They have been beaten to the ground. Once silver prices move to the upside, silver mining companies could provide multiples of the gains made in the precious metal.