Silver Market News
The slide in the Gold, Silver and overall commodity sectors has continued this week as Silver fell below $16 and is currently trading at $15.38 as I type these comments. Deflation looks to have the upper hand at the moment.
The Gold/Silver ratio is a bit over 74/1. As we would expect the fall in Silver has been deeper than that of Gold. Once prices turn around and rally again Silver will most likely lead to the upside and outperform Gold.
One of the possible outcomes to this price decline is going to be consolidation in the mining industry. The lower the prices go the more likely that there will be causalities. This will ultimately affect supply, especially if demand stays strong which looks to be the case.
Much of Silver’s production comes from base metals mining. If base mining production slows because of supply and demand issues in a weak global economy then lower Silver production will be an issue in a market with strong demand.
Physical Demand for Silver is Strong
According to an article in Kitco, Silver Eagle sales for the month of October were 5,790,000 coins. This is an increase of 40% versus September and a 87.5% increase when compared to October of last year. 38 million Silver Eagles have been sold so far in 2014. This is already close to the 2013 record of 42.7 million coins. (Source: Kitco 11/3/14)
According to a story in www.goldreporter.de The drop in Gold and Silver prices at the end of last week led to a sharp increase in demand from German precious metals investors. The article said that “There was a particularly strong demand for silver coins” with wholesalers expecting deferred deliveries.
Investors have been taking advantage of these lower prices and see the value in the metal. The reason we are highlighting Silver demand is because it is one of the key market fundamentals in our view. Should demand continue to be strong then supply will be impacted. The developments in the mining industry will be important to watch.
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