It’s interesting to hear financial media pundits call silver’s most recent price action a “lackluster” performance as if they consider what amounts to a modest pullback an ominous signal.
From its bottoming price of $13.96 last November, silver futures have surged to a closing high of around $16.08 in January of this year, pulling back to $14.95.
For sophisticated technical traders, silver’s most recent upswing is currently hovering near a 0.5 Fibonacci level, a level at which both buyers and short sellers (who sold the January highs) are at a profit.
What happens next is what matters. And a modest pullback from its highs is hardly a thing to get too concerned about, as retracements have gone much deeper before traders with long positions have begun to get worried.
At the same time, such alarm over modest pullbacks typically addresses short-term speculators. In contrast, we don’t buy silver for the purpose of short-term speculative profits. We’re in it for the long haul, not because it presents opportunities to may a quick buck, but because it embodies the attributes of sound money.
And as sound money, silver, when in decline, only represents a better buying opportunity, as all money whose intrinsic value is solid, sustainable, sound...as with silver, is best bought cheap.
Hence, it’s hard to be pessimistic with silver at its current levels, especially that its current price range is not of the level to incentivize a boost in production.
While gold remains the leader among precious metals, we still expect silver to outperform gold, as retail investment demand has not quite caught up to silver, as it is now beginning to with gold.
According to the Silver Institute’s World Silver Survey, total physical demand for silver rose by 4% to 1,03 billion ounces, a three-year high.
And since silver, unlike most other commodities, isn’t used to for an extensive range of end products, the metal is not likely to be impacted by a slowdown in global economic growth.
Plus, much of silver’s industrial use for renewable energy remains incentivized by governments, making silver not only a robust commodity (on the industrial side) but a commodity that will likely remain if not increase in demand.
But the real driving force behind the silver market, one that we’re anticipating, is that of retail investment demand.
The World Silver Survey study revealed that global investment in silver coins and bars increased by 20% in 2018.
The demand for bars alone saw an upward surge of 53%.
In addition to this, the study noted that last year marked the third consecutive annual decline in global silver production.
This means that while silver demand for investment has been steadily increasing, supply has been rapidly shrinking.
Last year, global silver production fell by 855.7 million ounces. At silver’s current price, mines are beginning to lose a significant amount of money in their silver mining operations. We shouldn’t expect silver production rise anytime soon.
And this short supply into high demand creates the perfect fundamental scenario to continue loading up on physical silver, as its only a matter of time until silver begins appreciating at a faster rate than gold.
If you need professional advice as to how to include physical silver coins or bullion into your portfolio, contact us at GSI Exchange, or download our free Definitive Guide to Investing in Precious Metals book.