Silver is Poised to Take the Gold

Gold has outperformed silver all year. But then a funny thing happened in October.

Gold went down … and silver didn’t.

Here at the Edelson Institute, we’re expecting a change in trend — a bullish turn in the metals. And silver could lead the way higher.

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Silver is benefiting from relatively decent industrial demand — much more so than gold. In fact, according to The Silver Institute, industrial demand accounts for just over half of all silver consumption, whereas it only accounts for 17% of gold’s use.

And industrial metals demand is picking up around the world. The International Monetary Fund upgraded its growth outlook for the U.S., Europe, Japan and China. The IMF added that the global economy is growing at its best pace in the last 10 years.

Manufacturing in Europe is growing at its fastest pace since at least 2014. China’s manufacturing hit a 20-month peak in September. And despite that country’s war on smog, which has led to the closure of many old factories, China’s numbers for October didn’t dip much.

Here in the U.S., manufacturing is zooming along at the fastest pace in 13 years! The Institute for Supply Management’s Factory Index climbed to 60.8 in September. That’s its highest reading since May 2004.

This is good news for all sorts of industrial metals. And the real industrial demand growth for silver is in photovoltaics — solar power.

That demand jumped to 76.6 million ounces in 2016 from 57.2 million in 2015. That’s nearly 25% growth. And the global solar power buildout is accelerating.

Now, not everything is shiny for silver. Demand for silver coins is plummeting. Purchases of American Silver Eagles is at a 10-year low.

And while ETF investors are stocking up on gold, you can’t say the same for silver.

The drop in ETF holdings of silver from June through September helped pressure silver prices lower. In turn, that helped cut the metal’s gain for the year in half.

But it’s likely that industrial demand is going to lead investor demand. Why? Because there is a supply squeeze shaping up for silver as well.

Mine production of silver will drop about 3.5% this year, to 857 million ounces. That’s what researchers at London-based Metals Focus said in a report dated Oct. 18. That will make the second year in a row that silver production has gone down.

In other words, we’ve hit peak silver.

Now, let’s bring it back to manufacturing. Researchers also say that industrial demand for silver will expand 3.1% to 502 million ounces this year. That accounts for more than half of total consumption.

This sounds like the ingredients for a boom to me.

The next time industrial demand ramps up, silver could kick into higher gear. You want to be ready for that.

An easy way to play this is using the iShares Silver Trust (NYSE: SLV). But there are other, better ways. Mining stocks and funds that are leveraged to the metal. When silver moves higher, these investments are poised to go ballistic.

Small mining stocks in particular are very leveraged. The good ones have the advantage of producing silver for less than the market price. When silver goes higher, the profit margins of these tiny companies can widen like the Grand Canyon.

I’m already steering my subscribers to these investments. Whatever you buy, do your own due diligence.

All the best,
Sean Brodrick

P.S. I’ll be speaking at the Metals Investor Forum in Vancouver, Canada, on Friday, Nov. 10, and Saturday, Nov. 11. If you like undiscovered gold and silver miners, explorers and developers, this is a great conference. If you’re in the area, consider joining me. You can register online here.

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Comments 6

  1. Keith Jandahl November 1, 2017

    Will you be giving us the name of some of the silver miners you recommend?

    Reply

  2. Dara Mark November 1, 2017

    Thanks, Sean – I will be looking into the silver miners.

    Reply

  3. ron goddard November 2, 2017

    how much silver is there on this planet really.?
    I read somewhere that the whole of silver here
    on earth is a cube of 17 meters=4,913 cubic meters.

    gold has a cube of 27 meters = 19,683 cubic meters

    so as silver disappears in commercial/industrial usage
    it is surely safe to assume that silver will become even
    less of a cube than gold is already.

    maybe I am wrong:-)

    cheers, ron

    Reply

  4. Machaon November 2, 2017

    When the manipulation of silver, primarly by J.P. Morgan who has been stockpiling silver for the past several years to the tune of 650 million ounces – while being the primary short seller in the market thus keeping silver prices low, then the price of silver will skyrocket. Who accumulates a silver inventory such as this if they don’t know they are going to make a killing on their [crooked] investment? Better find those silver Amercian eagle coins that are at a 10-year low in demand and put a few under the mattress – if they actually can be found………Machaon

    Reply

  5. Mark H November 3, 2017

    Any rally in metals will be crushed by unlimited, uncovered, naked short futures by the Feds bullion banks. Until the manipulators go to prison and are fined into bankruptcy this ongoing fraud will continue unabated. Is it financial malpractice for any investment advice on gold/silver not to include a warning of a corrupt, illegally manipulated “market”?

    Reply

  6. Bob Coleman November 6, 2017

    As an American Eagle investor the drop in coin sales does not surprise me at all. Almost all those purchasing Eagles are Trump supporters. They now feel that under Trump the economy and our nation will do well- which it is doing. There is a much smaller risk of a multitude of problems that would hurt our country with Trump than with Hillary. That contrast is becoming clearer and clearer. In addition, Trump, the disruptor , is on the whole a very good thing. And the more the Establishment attacks him the stronger his support is. I guess we all know how accurate the polls are.

    Reply