If This Happens, Silver Prices Could Skyrocket in 2016
Silver prices are not really telling what’s happening in the silver market. The demand for the precious metal is solid despite silver prices being down slightly for the first 10 months of 2015.
Just like gold, silver investors must understand that silver essentially has two markets, the paper market and the physical market. They must pay attention to the physical market. This is the place where we can get an idea about demand.
As it stands, the physical market says silver prices are severely undervalued.
Astounding Sales at the U.S. Mint; Lower Silver Prices Didn’t Matter to Buyers
Just to provide some perspective; in the first 10 months of the year, the U.S. Mint sold over 39.8 million ounces of silver in American Eagle coins. Mind you, this is after the mint had to halt silver bullion sales due to a shortage. (Source: Bullion Sales/Mintage Figures, U.S. Mint, last accessed November 2, 2015.)
In the same period of 2014, the U.S. Mint sold 38.1 million. In other words, the demand for physical silver is already running 4.5% higher.
In 2014, the U.S. Mint sold 44 million ounces of silver. This is the highest ever recorded since at least 2011 when silver prices reached their highs of $50.00. Don’t be shocked if this year is another year of record silver sales.
This isn’t all. There’s a new and major silver buyer in the market, India. This is something that shouldn’t be overlooked.
To give you an idea of India’s silver purchases; in August alone, the country imported $363 million worth of silver–48% higher than it bought a year ago. Here’s something interesting; in August, silver prices dropped below $14.00; the lowest level since 2010. (Source: Selected Major Commodities for August 2015, India Department of Commerce & Industry, last accessed November 2, 2015.) This tells me Indian consumers aren’t really paying attention to the silver prices. They want to buy regardless.
Mind you, these figures aren’t just one-off events. We’ve been seeing solid silver imports for a while now. In September, over $433 million worth of silver was imported into the country. (Source: Selected Major Commodities for September 2015, India Department of Commerce & Industry, last accessed November 2, 2015.)
If the demand for the grey precious metal remains staggering from India, silver prices could really skyrocket.
Silver Price Outlook 2016
Dear reader, you must pay attention to the basics when there’s uncertainty. Right now, the demand for silver is solid. The supply side is being crushed. It can’t produce much at the current prices. This is a basic economics problem, and suggests silver prices could soar.
If you listen to the mainstream, it will have you convinced that silver and silver-related investments aren’t even worth looking at. Don’t get lured by this opinion.
As I see it, silver prices at the current level seem severely undervalued. I fully expect them to outperform many asset classes. In fact, I expect the metal to provide better percentage gains than gold.