Here’s Why I’m Still Bullish on Silver Prices
Silver prices are trading at levels last seen in late 2009, but that doesn’t mean investors should completely ignore the gray precious metal. Keep this in mind: the lower silver prices go, the better the opportunity.
Before going into details, please look at the chart below of daily silver prices since 2008, paying close attention to the horizontal lines. These represent possible support levels if silver prices were to go down even further from where they currently sit.
Chart courtesy of www.StockCharts.com
For the precious metal to hit its lowest level since 2009, which is around $8.50 an ounce, silver prices will have to break below three key supports. They will also have to break below a major psychological level of $10.00.
Mind you, technical and chart patterns can only tell so much; you have to pay attention to the fundamentals, as well.
As it stands, the fundamentals suggest silver prices could soar big-time. We see that demand remains solid, but misery in the supply side is growing. Remember: if the supply declines and demand remains the same, silver prices will shoot through the roof.
Take the Canadian silver mine output, for example. In the first eight months of 2015, the silver mine output from Canada amounted to 255,176 kilograms. In the same period a year ago, Canadian silver mines produced 332,714 kilograms of the gray precious metal. Simple math tells us that these numbers represent a decline of more than 23% year-over-year in silver mine production in Canada alone. (Source: “Production Of Canada’s Leading Minerals,” Natural Resources Canada, last accessed November 18, 2015.)
Don’t for a second believe that silver production is only plunging in Canada, though. Take a look at the U.S. silver mine output and you’ll see it’s declining as well. Consider this: between January and August of this year, U.S. mines produced 741,000 kilograms of silver. (Source: “Mineral Industry Surveys,” U.S. Geological Survey, last accessed November 18, 2015.) In the same period a year ago, U.S. mines produced 769,300 kilograms of the gray precious metal. (Source: “Mineral Industry Surveys,” U.S. Geological Survey, last accessed November 18, 2015.) In other words, U.S. silver production has declined more than 3.6%.
If there’s one thing I need you to understand from all of this, it’s this one simple fact: in 2014, U.S. and Canada were both in the top-15 silver producing countries in the world—and they’re now both seeing output declines.
Silver Prices Forecast 2016
Despite silver prices going down, I am not discouraged whatsoever. Instead, I remain bullish on silver, because the fundamentals of the silver markets are improving and the precious metal declining in the midst of all this is only making silver appear undervalued.
One thing I have repeatedly said in these pages and that’s worth repeating again is that investors shouldn’t try to predict tops and bottoms; it’s just too dangerous for your portfolio. With silver prices, I especially refrain from doing so. What I am willing to predict, however, is that the probability of a massive upside potential is much higher than the probability of a major downside move in silver.
I remain optimistic towards silver prices going into 2016. I will not be shocked if the gray precious metal builds a solid base this year and starts to move higher as 2016 begins.