Silver in the High $50s? – Sean Brodrick
Dear Investment U: What is your outlook for silver – one month, two months, year-end, two years?
– Ron G.
Ron, you’re not the only one wondering about silver prices recently. Any time prices pull back to $20 per ounce or below, it sure looks like a tempting buy. And silver has fallen 30% since March 2013, when it was trading at more than $28.
We all like to buy pullbacks, right?
The question is, what will silver do going forward? There are four things driving the price of silver.
1. Global supply. Because most silver comes as a byproduct of other metals (lead, zinc, copper and gold), supply will remain steady unless silver dives below $15 per ounce and stays there. In the end, we’ll probably see more supply than last year. That’s not helpful for bulls.
2. Industrial demand. Forecasters are calling for strong industrial demand, based on economic forecasts including both traditional heavy industry and emerging technologies. However, this depends on the global economy. Industrial silver is, like copper, very economically sensitive.
3. Demand from jewelers. This one is hard to gauge, but there will probably be as much jewelry demand for silver this year as last year.
4. Investment demand. Demand for silver bars keeps ramping up. Meanwhile, purchases of silver through exchange-traded funds remain remarkably strong, even though the price of silver pulled back. Recently, silver ETF holdings were only 3% below the all-time peak of October 2013, compared to the 34% decline in total gold ETF holdings. This is very helpful for bulls.
Meanwhile, mom-and-pop investors in the U.S. are loading up on Silver Eagles. Take a look at this chart…
When those sales started, authorized dealers bought every silver eagle they could get their hands on that month. So, they literally couldn’t sell more than the 4.775 million silver eagles they sold that month.
The bullish news continued in February and March.
Put this together and it sounds bullish fundamentally. However, there is one more ingredient: paper buying and selling of silver. Speculators and the big banks that trade in and out of silver will press both weakness and strength in the metal. In the past year, this has been bearish for silver.
I’m telling you all this to give you some context for my silver forecasts. Let me show you another chart.
In the short term, you want to buy it near the bottom of that range. Buying it at $20 or under is fine.
In the intermediate term I’d expect to see another test of overhead resistance just above $24.
If silver can confirm a close above $24.20, you want to get long, because silver is likely going higher in a hurry.
But it’s very hard to predict when that breakout will come. The longer it takes, the bigger silver’s breakout will be.
Consumers in China, India and other emerging markets are buying more silver, and industries are finding more uses for silver all the time. Although current supply will be untouched by today’s prices, very little new supply will come into the market as long as prices stay low.
It would surprise me if we don’t see a test of that $24 in the next six months. It would surprise me further if silver didn’t really break out sometime in the next year.
That said, I’m not calling for $200 silver. But an old geology rule of thumb is that the price of a metal has to be three times what it costs to pull out of the ground in order to be sustainable. The average cost of mining silver now is just under $20. A target in the high $50s in the next two years works for me.
If you have a question for me about investing in metals or other natural resources, just comment below. I’m keeping my eye on it and will answer more questions in future columns.
Good investing,
Sean
P.S. Sean’s been telling subscribers recently that his precious metals signals have all started pointing in the right direction. And while on a scouting trip to Canada last month, he discovered a terrific silver miner that’s poised to take advantage. His Oxford Resource Explorer readers are learning about it right now. Join them by clicking here.
few things happening that are interesting
1) reverse head and shoulder patterns forming (target June)
2) currency’s around the world stumbling
3) demand for physical silver and gold increasing
4) EFT’s for silver held strong, gold is building
5) 40% of silver used in industrial uses and growing
* China’s answer to a slow down will be more industrial projects
6) Likely next move after taper ends will be to put cash in banks to work… ie. more building and production
7) Japan inflation excelerating out of control
8) conflict still existing work wide
9) Euro/Europe a “hot mess”
10) Have to love PM when every else hates them
11) Equity market will have continued poor reports from economy, continued to push another few percentage points higher (3%) in the next 3 months….then the current earnings reports coming up coupled with July earnings will turn over the equity markets as taper is then reduced to 25 Billion a month……quick 10-15 % correction then grind down thru 2015 and rebound with new rebirth in 2016.
Gotta tell you Mr. Goldman, I do not understand why that has not already happened. Yes there is the issue of low interest rates, but it still should have happened.
Big Al, You have Lou Dobbs night after night interviewing guests that tell everyone that the economy is improving, stocks are not over valued, earnings are going to come in strong…and the B.S. Just keeps flowing….in my opinion that is why it has not yet happened…we’re patient and on the right side with the metals…just need to wait a bit longer and ignore the ridiculous statements from the liberal media…..
Yep, the media does seem to be pretty liberal for the most part. I gotta believe that a lot of the “party line” is there because if the average Joe and Jolene believe any differently it will be all over.
That doesn’t make it right, but it does keep away the panic that I am positive would ensue.
ditto Gator………….
The government and central banks et al’s power is so absolute, it’s turning reality on its’ head. It is as if they are saying “If you want to buy alternatives to our controlled fiat currency, if you want to buy gold, silver, platinum, real estate, etc. You can – but you will never be allowed to live off of them. They will always be too expensive to buy in bulk, and yet too low to recoup your costs when you sell. We’ll keep the premiums high, the taxes high, and the capital gains tax on them because we won’t count them as ‘money’. So you can try to stay out of our arena, and you’ll always be poorer because of it.”
That’s the message I’m getting from The Powers That Be. It’s almost as if you are not allowed to own gold until you are worth $50 million dollars and only buy in the large gold bars kept at duty-free airport vaults around the world. That’s when it counts to these people. If your income is only $40,000 or $50,000 you’re not allowed to own silver or gold, you’re supposed to keep the bulk of your money in their central banks for other people to enrich themselves off of it.
S50 silver would be a boon for the savers of the world, yet the elite act as if everyone suddenly built a spaceship in their back yard and took off for Alpha Centuari instead of mowing the elite’s yards and cooking their dinners. A loss of control over the life and death of billions. I don’t understand it.
jhpace, that is definitely a good way to look at it!
Let me give this to you straight JH. It is not in the interest of any major Central Bank on the planet to see gold rise too quickly at this time. Not for Japan or England or the US or Canada or anyone else. And the reason is that it is not in anybodies interest is that nobody wants to see the US dollar devalued abrubtly nor their own currency falll in tandem. In fact it is far more favourable to most if the dollar would strengthen at this time. Even the Russians, who have a might hoard of greenbacks, would not favour a sharp rise in gold because that costs in too many other ways. I hardly need to mention the Chinese, Japanese or Korean holdings of treasuries here. Goldbugs just hate to hear this of course. They are utterly alone on a pllanet where virtually all the CB’s would happily cooperate to suppress the price of gold as it means the existing system will remain stable at a time when so many counties are grappling with other economic issues that already absorb most of their time…..and stability is what everyone wants right now.
Stability? Or control? How can leeching the man-hours, the savings, of hundreds of millions of workers be “better” than a multi-commodities standard? We’re living in a box, if not a downward spiral, precisely because we are not allowed out of the box, to have stability on our own terms, and not the elite’s.
Bravo,jhpace1 !!!!
Monetary history is read by some here,at least.
Interesting Bird, I had not really thought about that!
When gold reaches Jim Sinclair’s $50K target in 2020 silver may reach $3000.
Sorry Bonzo, I just don’t buy $50K gold!
Does anyone else?
Only in my dreams.
Remember Al 50k believers are the people calling for hyperinflation, that is the only scenario in which it can happen.
I guess you are right Bobby. But again, that is not why we buy and hold!
I can envision 7,500 gold and 250 silver…the other stuff….I dont see happening..
I don’t know about $7,500 gold in my lifetime!
This article is a credible source for where prices are headed and why.
http://www.silverdoctors.com/an-average-joe-asks-should-i-bet-the-house-on-silver/#more-40673
GATOR…………thanks for the post……………I am thinking the same as RICE, the tptb are just pushing this problem down the road………They now have the Courts on their side.
Pushing down the road never works in the long term.
If the fed fiat scam is ended and it is found that America’s gold has been plundered it is very easy to see $50k in Fed fiat notes.The Fed is a lie sucking the earth for it’s power.
How this generation is going to get rid of the Fed and allow constitutional money to free the union is another debate.
I don’t see a Kennedy or Jackson even being allowed to ever see the light of America(insert Ron PauI here).I see yes men placed into power to preserve a corrupt and evil system of lunacy.
The real problem is the sheeple , just do not get it…….
Unfortunately, you are correct in my opinion.
Upper 50’s sure why not? In the 90’s probably more like it on the next bull run….. coming to a theatre near you soon…..:)