Gold might have the lustre and the aura, but silver has outperformed gold with year to date figures showing the silver price up a fraction more than 2% while gold is 0.7% lower for the same period.
Gold Council statistics show that 45% of gold is used for jewelry, 45% for investing and the remaining 10% for industrial purposes. On the other hand, around 60% of silver production is used for industrial purposes according to the Silver Institute.
The Institute also sees an increased demand on new usages for silver coming from industry, particularly in China where the use of silver in the manufacture of electronic apparatus is showing rapid growth. The potential for growth in the industrial use of silver seems certain to increase the gap between percentages of gold and silver used for industrial purposes.
Despite the great potential for growth in the demand for silver, Libertas Wealth Management Group president, Adam Koos, advises investors to be patient despite a plethora of facts indicating an excellent future for silver. Koos made it quite clear that if an investor is trading and is making money, they should not invest in silver right now. Instead, Koos stated that the best way to position oneself in the silver market is to “take the short side.” The other pertinent advice he offered was “purposely procrastinate.”
One of the factors making silver an attractive investment proposition is the fact that the growing industrial demand for the metal is outstripping supply. Silver sells at a relative discount when the fundamentals are taken into account, which means that there are expectations for the price to increase in the future.
The current price of silver (SIN, +1.27%) is hovering at the $16.00 level and it is way below the record high the silver price reached in 2011 when it was trading at $49 per ounce. The shortage of supplies of newly mined silver relative to demand over the recent past would indicate that market forces should force the price up.
Bradford Cooke, CEO of Endeavour Silver Corp. (EXK, +2.43%) stated that, “There is no new mine supply ready to be developed, yet industrial demand continues to grow.”
Regardless of what the fundamentals indicate, charting the way forward for silver is difficult with conflicting expert opinions.
Chintan Karnani, chief market analyst at Insignia Consultants, has a bearish outlook for silver in the face of a lack of demand by Asian buyers. Figures show that the fight on corruption in China appears to be succeeding with the demand for silver bars showing a decrease of 50% during last year. Despite his bearish outlook, Karnani feels that silver will form a long term bottom before September 2015, which will be followed by a consolidation and higher and wider range in January. He then forecasts the start of a bull run on the metal.
And the advice from Libertas Wealth’s Koos to long term investors? - “Take a little hiatus until 2016 ...when the U.S. President will be a huge question mark, U.S. stocks will most likely pick up in volatility and any rate increases will have already been priced into the metals.”
There is a strong sentiment that the silver price may hit $30 during 2016.
MT4 Chart: Silver