When Will Silver Price Rally Again?
When will that silver bear wander back into the woods?
As a registered floor broker I was one of the people that traded silver from $5-55 and back down again during the Hunt Brother days which was the first big run up in prices for the shiny metal. I then traded silver as it ran from $5-50 once again but this time the full time span was much longer and it really took about seven years to get back to the old lofty heights of before. It felt much different than the last go around as it was much more orderly and trending.
Now with this recent pause in the market, lets' catch our breath and reexamine the market for the next coming rally. Right now demand is very large from India and might just be the largest in recent memory. The early numbers seem to point to approximately $4 billion in Physical Silver purchases just out of India so far this year. Cross-indexing India’s silver consumption from the SRSrocco Report on India’s Citizen Demand for the metal shows that there's a 27% increase in purchases over last year. So what does this large consumption in metals mean to the lay person? Well it’s very close to 33% of all silver mined and refined worldwide and it looks like a real base is being put in at this level. Now let’s ask ourselves what the consumption of 9,000 tons of refined silver will mean to someone that produces solar cells or computer key boards. Does it mean that silver demand will outstrip the production availability, force the price of their raw materials up and become prudent, and start to stockpile silver again? Will these solid fundamental numbers bring about a slow reversal in the current down trend by making end users stop buying on a demand only basis?
To answer these questions I will draw on my 35 years of trading experience and share with you some hard lessons I have learned. I traded silver from the long side as it was below the cost of production for a long a time while waiting for the turn around to the upside to come. I learned that the market is always right, not the other way around. As a prudent investor the answer is a very simple one. Patience will and must rule the day. What you have to plan on is using the old DCA investing plan model. Buy smaller amounts of metals to put them away until the next rally comes. Use the Thomas Method, buy the metal when it goes down, add a little more when it just trades sideways and add on even if it goes up. Never borrow to invest and plan on the long term for a good return.
I know this isn’t a sexy investment picture with all the pop and sizzle of some of the high flying investments out there but I see this two ways.
- You hold the physical metal in your safety deposit box and it’s not going to disappear overnight due to an error oversight of some watchdog committee.
- With T-Bills current rates paying about .2% right now just about any increase in the underlying price in metals will look mighty good over the next few years.
As we go forward I want you to look out to 2017-18 and then plan on cashing in those coins and bars. Remember you can put metals into your IRA’s too but hopefully we will have had a good appreciation in price that will reflect the current underlying consumption of raw product. I remember someone once said, “Buying real estate and raw products from the earth is always a good investment as they’re not going to be making any more of it”. It was good advice then and it still holds today. Let’s hope I can put enough away before hibernation season starts.
Courtesy of https://www.zanerpreciousmetals.com/
Peter Thomas is a senior vice president at the Zaner Precious Metal Division. As a licensed floor broker he was a filling broker in the silver pit back in the days when silver ran to $55 an ounce. He currently manages a global cash desk which handles Refiners, Recyclers, Mining Operations and Coin & Bullion companies. He is constantly in demand for his insightful opinions drawn from his 35 years of metals trade to such news companies and magazines publishers as Bloomberg News, The Guardian, Hard Assets, Kitco and Futures magazine. Reach him at @Goldbug111, (312) 277-0140 or firstname.lastname@example.org.