Declining Production Could Send Silver Prices Soaring
If you are looking for where silver prices are headed next, look at the supply side. It suggests that massive moves to the upside could be ahead.
It can’t be stressed enough: silver production is declining. Major silver-producing regions are reporting declines.
Look at Mexico, for example. It is the biggest silver-producing country in the world. Between January and April of this year, silver production in Mexico amounted to 1.55 million kilograms. In the same period a year ago, silver production was 1.61 million kilograms. This represents a year-over-year decline of close to four percent. (Source: “Value and Volume Production of Silver,” Servicio Geológico Mexicano, last accessed July 20, 2016.)
This isn’t the whole story, though. You should also look at U.S. silver mine production. The U.S. is one of the top 10 silver-producing countries globally.
Between January and April, U.S. silver mines produced 370,000 kilograms of the precious metal. In the same period a year ago, mine production came in at 399,000 kilograms of silver. This represents a year-over-year decline of 7.26%. (Source: “Mineral Industry Surveys,” U.S. Geological Survey, last accessed July 20, 2016.)
In Canada, we see something very similar. Canada is the 14th-biggest silver-producing country.
Between January and May, silver mine production in Canada was 145,890 kilograms. In the same period a year ago, it was 161,541 kilograms. This represents a decline of 9.68% year-over-year. (Source: “Production Of Canada’s Leading Minerals,” Natural Resources Canada, last accessed July 20, 2016.)
Mind you, these are just a few examples. Other silver-producing regions are reporting dismal production figures as well.
Silver Prices Outlook for 2016, 2017, and Beyond
Dear reader, you should be thinking economics 101 when looking at silver prices these days. As it stands, we see demand for silver increasing. (You can read all about the demand here: “Silver Prices: 1 “Magic” Number Says Silver Could Spike to $50.00.”) When you have demand soaring and the supply side struggling, it’s a perfect recipe for much higher silver prices.
Let me just say this: silver prices are up well over 40% year-to-date and if the disparity between the demand and supply continues, don’t be shocked if the silver price is at $30.00 by the end of 2016.
The phenomenon of silver prices hitting $30.00 by the end of 2016 could bring in many more buyers. As a result, the price of silver could hit $50.00 by the end of 2017! Remember, investors tend to run toward assets when they are rising and prices tend to move faster in the later part of the rally rather than the earlier part. So, I reiterate, silver hitting $50.00 isn’t an irrational estimate.
How to Profit from Higher Silver Prices
With all this in mind, I maintain my stance that quality silver mines will offer the most profitable opportunities as silver prices increase. If silver prices increase to $50.00—or 150% from the current $20.00 level—there are several miners that could provide investors with a gain of up to 562%.
Consider Pan American Silver Corp. (USA) (NASDAQ:PAAS), for example. As silver prices have increased 40% year-to-date, PAAS stock has increased 150%, which is 3.75 times the return of silver. So, if silver prices move 150% and the same sort of move to the upside continues on Pan American Silver’s stock, there could be solid rewards for investors.
(Please note that this is not a buy recommendation. Rather, it’s an example of the kind of opportunities investors could seek.)