Silver Demand is High
Silver is unique in the sense that it has two different sources of demand: investor and industrial. Over the last couple of years, demand for buying silver American Eagle coins has been so high that the U.S. Mint couldn't keep up with the demand. What's incredible is that this hasn't just happened once, it's happened several times. This is a huge indication that investor demand is currently going strong.At the other end of the spectrum is industrial demand. Silver is used in many industries including electrical, health, energy, and consumer-related products. This means that mining companies have to keep up with the demand of these industries for production of important gadgets such as cell phones and medicinal instruments.
Silver Supply is Low
The amount of silver that is available to mine is quickly dwindling. In 2014, The Silver Institute estimated that mining companies alone excavated 877.5 million ounces of silver. The total supply of silver for that year was 1,061.8 million ounces while the physical demand for silver was 1,066.7 million ounces. This left silver with a deficit of 4.9 million ounces. Demand has continued to rise over the last two years, but supply has been scarce and will continue to diminish.Keith Neumeyer, top mining CEO, confirmed the deficit silver is currently facing in a recent interview:
Interestingly enough, we're only mining 10 to 1. For every 10 ounces of silver, 1 ounce of gold is mined. Silver is way rare than even we had thought it was 500 years ago and consumption is increasing every single year. The above ground supplies of the metal, you go back and look at what was above ground in the '80s, and there's about 5 billion ounces of 1,000 ounce commercial bars. That's down to just a billion ounces of silver that's accountable.
So we've consumed 4 billion ounces of silver in the last 30 years and it's gone. It's not coming back. It's not in recycle. It's in waste dumps, it's in the ocean, it's in stuff that will never be seen. Again, at that rate and as the consumption is increasing, and even if production stays flat, which it doesn't look like it is... but even if it stays flat, that deficit between mine supply is about 800,000 million ounces and that middle consumption 1.1 billion ounces is eating away at all of this above ground supply.
We're trading, right now, at 80 to 1, gold-silver. We're mining at 10 to 1, and we're in a deficit. How can that relationship last? We're going to have a racial compression, in my view, that's going to send the price...and I've said this 100 times... to triple digits. I know that at $14 or $15 silver that sounds stupid and it's probably hilarious to many people, but that's where I think it's going. That's why I put together a silver company 13 years ago and that's what I'm looking forward to and we'll see what happens. We'll see if I'm right or wrong, but that's what I think is going to end up happening.
Silver Market is Currently Bearish
The white metal is currently in a bear market despite the rise of demand. However, many precious metals experts, such as Keith Neumeyer, are expecting silver prices to rise. Given the low price per ounce, now is as good a time as any to start buying silver. Once the market turns bullish, investors who take advantage of the low prices now will be sitting pretty later.Going back to the original question, buying silver right now is a great idea. However, if investors are looking for a quick return on their investment, they may want to consider a different avenue. Precious metals of any kind are not a means to get rich quick. If you're willing to hold on to your silver until prices rise, you'll be rewarded handsomely.
