Silver fell back to $31.40 an oz at midday EST following its 80 cent jump yesterday. Looking back over the quarter, silver has disappointed in its inability to sustain a rise beyond $32 since peaking at $34 at November’s end. At that time many, including us, thought we were seeing the beginnings of a run to $36 and more only to be brought back to the realisation that Mr Market had other plans for the white metal.
Quite what those plans are in the shorter term remain a mystery to us, and, we suspect to other precious metal analysts who are honest to themselves whether they be fundamentalists or technophiles.
Physical Silver in Strong Demand
That there has been a run on physical silver is undeniable. The US Mint sold a record 7.4 million ounces so far this January despite halting sales midway through the month until the 24th. To put it into perspective, total sales for the previous month, December was 1.635 million ounces.
The January sales were the largest total for twenty six years. The Royal Canadian Mint has also put limits on sales of the Silver Maple Leaf coin.
Shortfall in Silver Production
Less silver is being produced as mining companies, even the largest, cast around for capital to fund improved returns from their operations while at the same time demand for the metal is increasing for a variety of industrial uses and stands at more than half of annual demand. Coins and bars for investment, jewellery, medical applications, photography and silverware make up the remainder.
Consultants Thomson Reuters GFMS forecasts a 6% rise in industrial usage this year while the IMF forecasts a 3.5% global economic growth. The anticipated strong global industrial demand coupled with a possible shortage of silver can be expected to drive the price together with the metal’s strong association with gold as wealth preservers in the face of the ongoing money printing posing as financial stimulus.
Silver is in a long term uptrend, patience and resolution will eventually be rewarded when the market recognizes the value of this versatile precious metal. Have no fear when silver falls, be resolute and follow the trend.