Silver has been one of the best-performing investments of the year, up a whopping 23.6% so far. Pay close attention to silver prices, dear reader. I believe the gray metal will continue to rise in price right through 2016.
As the chart below of daily silver prices illustrates, silver has traded above its 50- and 200-day moving averages for months now. With this, remember the most basic rule of technical analysis: the trend is your friend, until it’s broken.
But, technical analysis isn’t the only reason I’m bullish on silver prices. The fundamentals suggest the demand and supply situation in the silver market is distorted—demand is soaring, while supply is lagging.
In fact, silver mine production is falling. Consider what’s happening in Canada. In the first two months of 2016, silver mine production in Canada amounted to 54,752 kilograms. In the same period a year ago, that number was 62,795 kilograms. This represents a decline of 13% year-over-year. (Source: “Production of Canada’s Leading Minerals,” Natural Resources Canada, last accessed April 19, 2016.) In 2015, silver mine production declined more than 20% in Canada.
Chart courtesy of www.StockCharts.com
The phenomenon of declining silver products prevails across the board. Mexico is the biggest silver-producing country in the world. And mine production there is dwindling. In November of 2015, the country produced 426,817 kilograms of silver. In January, it produced just 385,001 kilograms—a decline of 10% in a matter of months. (Source: “Value and Volume Production of Silver,” Servicio Geológico Mexicano, last accessed April 19, 2016.)
As for demand, know that the number of buyers is increasing. Mints around the world are selling silver coins at a strong pace. Even India, the country that loves gold, has built up an appetite for silver, too.
Silver Price Outlook for 2016 and Beyond
Throughout 2015, I wrote about how silver was oversold and underpriced. Despite the rise in silver prices this year, I still believe silver is undervalued and that it presents an opportunity for investors. The demand/supply situation in the silver market calls for big rewards for investors in 2016. With silver prices up 23.6% this year, the shares of some of the quality silver-producing companies I follow are up more than 100%. I think they will go a lot higher.