If You Ignore Silver Prices, You Could Be Kicking Yourself Later
Pay attention to silver prices and silver mining companies if you are looking for the next big trade. The gray precious metal could soar immensely, and reward investors big-time. If you are considering the recent weakness in silver prices to be a discouraging sign, you could be making a big mistake. Think long term.
There are three factors painting a very bullish picture for silver prices.
1. Gold Rush to Give Boost to Silver Prices
Understand that silver prices have high correlation with gold prices. Usually, as the yellow precious metal moves higher, the gray precious metal move to the upside as well. That said, as it stands, there seems to be a gold rush in play. For instance, along with central banks and consumer demand for gold, we see that investors are rushing toward the metal that they ditched in 2013.
Consider this; in the first two quarters of 2016, exchange-traded funds (ETFs) and similar products witnessed inflows of 579.3 tonnes of gold in the first half of 2016. In the same period a year ago, these funds had inflows of just 2.6 tonnes. (Source: “Gold Demand Trends Q2 2016,” World Gold Council, August 11, 2016.)
As gold demand continues, gold prices could soar. This could result in investors rushing to silver and sending silver prices higher.
2. Tech Products Need Silver
It is often forgotten that silver has technology uses as well. The gray metal is used in tech products due to its ability to conduct electricity, and several other reasons. We are seeing a boom in technology products like cell phones, tablets, laptops and so forth. These electronic items use silver in them. So, as demand for tech products increases, demand for silver could increase as well and send silver prices through the roof.
Recently Michael Lombardi, founder of the investment research firm Lombardi Publishing Corporation and the financial web site Profit Confidential, wrote about this phenomena here: “Silver Prices: Tech Sector to Send Silver to $50 an Ounce?”
3. Silver Shortage Could Be Ahead
The possibility of a silver shortage has been discussed in these pages several times; currently, silver production is in trouble. Major silver producing regions are reporting a decline in silver production.
Future silver production is in trouble as well. You see, exploration spending at mining companies has taken a severe hit over the past few years. Know that exploration spending is essentially an investment in future production. So, it could take some time until more silver is found and extracted from the ground.
Now, think basic economics here; we are seeing a robust demand for silver, be it from the technology sector or investors. With silver production facing headwinds, what could happen? We actually could see a shortage in the silver market, which could send silver prices much higher.
Silver Prices Outlook for 2016 And Beyond
Over the past few weeks, silver prices have come under scrutiny from investors, mainly due to the noise about the Federal Reserve raising interest rates.
I reiterate; think long term.
In the long term, we could see a massive run to the upside for silver prices. I am not ruling out $50.00 silver in a couple of years. Obviously, time will tell. It may be a great idea for investors to pay attention to silver mining companies. They could be the biggest beneficiaries as the silver price hits $50.00.