Last weeks have been amazing for precious metals. After all the uncertainty in the global markets, many investors and experts in the matter are changing their minds. There is no longer doubts about the seriousness and valuable role of gold, silver, palladium, platinum, bronze and other metals as financial instruments.
Regarding silver, forecasts are highly optimistic. John Embry, a well-known analyst in the metal and mining industry, is sure that silver bullion is going to triplicate its value soon enough. While it seems too good to be true, there are realistic reasons backing up this theory.
Recycled Silver is Far from Being Enough
Other experts think that the massive revaluation of silver will come from the low levels of recycled silver in comparison with industrial demands. This is a number constantly decreasing year after year, following the same trend during 2016.
Last year, recycled silver supply only reached the 8% of the total silver demand of the jewellery industry. This had a positive impact on silver prices during 2015 and 2016.
Also, the total recycling of silver during 2015 was 13% of the absolute demand in all sectors involved, implying the huge amount of silver we are not going to see again. In more concise numbers, only 4,665 metric tons of silver were recycled, trying to satisfy a demand of 36,423 metric tons of usable silver in all kinds of industries.
We must also notice that silver demand is growing as well.
In the jewellery sector, at least, we found that silver jewellery’s production is more than double in comparison with gold’s. This may be caused by the recent growing gold prices, stimulated mainly by negative rates used by central banks and the Brexit.
Another good factor to consider is that the recycled business only worth the time when it is involving gold, because its price. Silver is easier to acquire brand new because pawn shops have little stock to supply demanding manufacturers. This is a situation easy to understand, actually. It’s more probable that someone is going to sell gold at a pawn shop instead of silver. A small piece of silver can cost less than US$10, for example, having little attractive.
Finally, if we adjust for inflation, we will notice that the record-high of US$100 during 1979 can be crushed any time soon at the current pace.
On the other hand, Bloomberg News and other business-focused media are arguing that silver is going down, fast. According to the recent news, the ones holding silver are going to have great losses.
The argument seems very legit as well. Many jewellery companies in India are cutting in half their demand, mainly because slow sales and a notable inventory excess. The great importance of this is that India is one of the biggest buyers of silver in the entire world.
If a country like India stops its silver demand, prices would receive a serious hit. According to the news, this reduction in nationwide demand is happening right now and there is nothing to stop it.
The only way to fix this problem would be using a relevant share of the actual inventories to restart the supply. In order to this happening, both Indian and overseas consumers of silver jewellery must be purchasing again.
The real reasons why users are now ignoring silver pieces is quite hard to recognise. With a pricey gold these days, silver jewellery should be more popular than ever. But things aren’t happening like they supposed.
October’s monsoon could help this situation by boosting domestic sales of silver and jewellery, the best way to invest in silver however is buying silver bullion.
With the current silver market in it’s current position, it is highly possible silver may be supporting the current gold price as well.