After a rollercoaster performance in 2015, silver is performing better in the early part of the year.
The precious metal benefitted from the strong first day sale of American Eagle silver bullions administered by the US Mint in January, which hit almost 2.7 million ounces. Reuters reported that the number is almost half of the 5.53 million ounces of the same coin sold in January 2015.
Overall, the US Mint was able to sell 47 million American Eagle silver coins in the previous year or about 7 percent increase from the previous year’s high of 44.006 million coins.
This early, the US Mint has sold more than 8 million ounces of silver in American Eagle coins. It is on track to another year of record high silver sales.
While spot price of the so-called poorman’s gold slipped to six year lows of under $14 per ounce, there was a sudden surge in demand for silver coins elsewhere in the world.
In Australia, a 53 percent annual increase in silver sales was reported by the Perth Mint. Silver sales closed to nearly 11.6 million ounces in 2015. The Royal Canadian Mint, meanwhile, said there was a 76 percent increase in silver maple leaf coins in the third quarter of 2015 compared to the performance in 2014.
Smaugld.com cites that demand for silver coins in the said countries is so high that neither Canadian nor American mining production would be able to meet it. Industry group The Silver Institute echoes the statement, saying it believes that the silver market will be in a deficit for the third consecutive year, with a shortfall of around 57.7 million ounces.
Silver output will also be affected, with Capital Economics anticipating it to be at 3 percent this year due to cost cutting across industrial and precious metal industries. Its commodities economist Simona Gambarini was reported to have said that the firm expects around 6 million ounces a year could be lost brought about by closures by BHP Billiton and Glencore.
The lower supply coupled with the recoveries in global industrial production should make silver outperform gold this year, according to the market watcher.
Standard Chartered PLC expects mine production of silver to drop this year. If that happens, it will only be the first time in over a decade for silver mine production to fall, with demand to outstrip supply for a fourth straight year.
Much of the silver supply in the world is extracted from the ground with other minerals. Output reductions as announced by big miners will not only affect silver prices, but other metals like copper and zinc.
Many observers share favorable outlook for silver. Capital Economics Ltd. adds that silver has the potential to climb to about $21 an ounce next year, from the $15 an ounce that it is in this month.
Exchange-traded funds backed by silver have also been strong, having their biggest inflows over three days in a three-year span. This has caught many watchers by surprise as investors have traditionally focused on gold.
Silver based investments such as the iShares Silver Trust and Global X Silver Miners ETF have also been performing well. The two investments have risen by 7 and 6 percent, respectively, since the beginning of the year.
Investors know that like gold, silver is considered a safe haven. In fact, silver is even more valuable during financial crisis when markets fall and there’s great demand for store of value. During the financial crisis of 2008 thru the end of 2010, the price of silver doubled while gold only increased by 70 percent.
Silver prices will also get a boost with investors worried of systemic banking crisis in the Eurozone, and concerns of economic recession.
According to the Silver Institute, the price of the metal should find solid ground this year, if not break the psychologically level of $16. It believes that silver deficit will accelerate and further boost the price of silver.
The US Geological Survey says that US silver mine production dropped by around 8 percent in the first month of 2015 which is in sync with the Institute’s pronouncements, and should continue to drive silver prices.
The Silver Institute says there should be higher demand for silver. The metal is widely used in industrial applications. It is used in solar panels, coins, and plastic production.
Demand for silver will also increase in India. Along with China, the Asian country is known as one of the main buyers of silver.
Alongside gold, silver looks to be one of the best commodities to invest in. The metal is off to a great start in 2016, and if we are to believe market watchers, the trend will continue for the rest of the year.