Silver Prices: Here’s How $50.00 Silver Could Be in Rearview Mirror

Silver PricesDismal Silver Production to Send Silver Prices Soaring?

If you want to know where silver prices are headed, then just look at silver mine production. It’s screaming that the gray precious metal could soar.

Why does silver mine production matter? As my colleagues and I have mentioned many times in these pages, the demand for silver remains resilient—even when silver prices are down. If mine production tumbles, it could distort the basic economic equation and send silver prices soaring.

With this said, on nearly a daily basis, we are seeing information that silver production continues to face constraints. For example, please see the table below of silver production in Mexico since 2010. Why Mexico? It’s the biggest silver producer in the world.

Silver Mine Production in Mexico, 2010–2015

Year Silver Production in Kilograms Year-Over-Year Increase
2010 3,499,470 29.93%
2011 4,150,347 18.60%
2012 4,496,393 8.34%
2013 4,860,923 8.11%
2014 4,729,407 -2.71%
2015 4,895,671 3.52%

Data source: “Value and volume production of Silver,” Servicio Geológico Mexicano, last accessed March 23, 2016.

Notice something interesting? Mexico’s silver production is plateauing.

In 2010, the country produced almost 30% more silver than a year earlier. In 2014, mine production witnessed its first decline since 2007. In 2015, it increased a little bit, but it’s nowhere close to the previous years’ growth rates.

If you pay attention to other silver-producing regions, things are actually looking worse.

Consider the U.S., for example. Silver mine output in 2015 declined more than nine percent in the U.S. (Source: “Mineral Industry Surveys,” U.S. Geological Survey, last accessed March 23, 2016.)

And when you look at Canada, one could actually say that silver production in the country is collapsing. (You can read more about Canadian silver production in 2015 in my article, “Silver Prices: This Could Send Silver Prices Soaring 32%.”) In January, silver mine production in Canada declined by nearly 18% in the first month of 2016 from a year ago! (Source: “Production Of Canada’s Leading Minerals,” Natural Resources Canada, last accessed March 23, 2016.)

Mind you, due to lower silver prices, mining companies also pulled back significantly on exploration. If you are thinking supply will come in an instance, you may be fooling yourself.

Silver Prices Outlook: Bullish if You Own It

If you listen to the mainstream, they will have you convinced silver isn’t worth owning and it’s only going to lose you money over time. They will cite things like a global economic slowdown pummeling silver due to its use as an industrial metal and so on.

Dear reader, I see silver as one of the most hated assets out there. What’s also interesting is that it’s being disliked when the fundamentals of the markets are getting better each day.

Here’s what I see (and this opinion is not very common among precious metals analysts): it’s very evident that demand for silver remains solid. Even if we say industrial production is dismal, investors are making up for it. Now, with supply facing a significant number of headwinds due to lower silver prices, we could see a shock in the silver market. This phenomenon could really send silver prices through the roof in a very short period.

We could be looking at $50.00-an-ounce silver in the rearview mirror.

Time will tell more, but in the meantime—silver bears beware!

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