I know it’s a bold prediction: Silver will Outperform Gold in 2015 and is going to surprise investors and provide them with better returns than Gold Bullion. I say this because both the fundamental and the technical pictures for Silver continue to improve. The supply of Silver produced continues to dwindle, while demand for the metal is very robust, and this is the perfect recipe for higher prices.
In Canada, a major Gold-producing country, in the first nine months of 2014, mines produced 373,828 kilograms of Silver. In the first nine months of 2013, Canadian miners produced 510,390 kilograms of Silver—representing a 26% decline in Silver mine production. Mine production in other Silver-producing countries is also on the decline, whilst market price remains depressed.
As Silver prices remain low, producers have less incentive to produce this beautiful and precious white metal, and those whose production costs were far too high have already shut down their operations. Meanwhile, the demand for Silver continues to intensify. From January 1 of this year to December 9, the U.S Mint had sold 42.86 million ounces of silver in American Eagle coins.
In the entire year of 2013, the U.S Mint sold 42.67 million ounces in similar coinage, and because of the holidays, December is usually a very robust month for Silver coin sales; hence, the number of American Eagle coins sold this year will no-doubt increase further. Demand from India is also very strong. Ashish Mundhra, managing director of Mundhra Bullion, a precious metal dealer in India, said, “There is a tsunami in sales occurring, and Investors are pouring in.”
The Technical Perspective:
When I look at the long-term chart of silver prices, it keeps me very optimistic, that this precious metal has a long way to go. My chart shows me how the bull market began back in 2002, and continues continues to find strong support, as it dips through market manipulation. The price of silver has certainly come down from its peak back in 2011, but it still remains well above the lows it made in 2009.
What is also worth noting is the Gold-Silver Ratio. This ratio is simply how many ounces it takes to buy an ounce of Gold. It currently sits at 73.51 ounces. Looking at it from a historical perspective, since 1970, the average Gold-Silver Ratio has been 55.4 ounces. If we assume the ratio will come back to its historical average, either Gold prices need to collapse or Silver prices will have to increase to at least $22.00 an ounce—34% higher than where they sit today.
If the price of Gold bullion continues to rise, as it has been since October of this year, then Silver prices will need to move higher than $22.00 an ounce, as it regresses back to its historical Gold-Silver Ratio.
My final message for this report is this: Don’t worry about the daily fluctuation in prices. The markets are ruled by manipulation and short-term emotions, and these conditions present long-term investors of this beautiful white metal with an opportunity to purchase physical silver bullion at bargain basement prices. Just don’t wait too long to get your share!
Author: Michael Lombardi