What does your position in silver look like? Maybe you have a few silver coins stashed in a safe place in your home, maybe you have a small collection of junk silver, or maybe you’ve never considered investing in silver at all. If you’re thinking about increasing your exposure to precious metals, you may want to seriously consider buying silver instead of gold. The fundamentals of silver are promising for investors. Prohibitive production costs are keeping production down at the same time that silver demand is on the rise. Currently, silver demand is outpacing silver supply, even though prices have remained consistently low due to speculative short selling. Combined, it’s an unsustainable situation that’s close to bursting.
Silver Production Costs on the Rise
The all-in sustaining costs (AISC) of silver production in 2017 averaged out to just under $11.50 per ounce across the biggest silver miners. But those numbers are skewed by Silvercorp Metals Inc. (SVM), which posted only $2.26. That’s highly profitable with silver prices today over $16, but other miners aren’t so fortunate. Many companies are seeing costs of over $10 and some even higher than $15. With such low profit margins and rising production costs, many silver miners are diversifying into gold, which is keeping silver production low.
Silver Demand Outpaces Production
That’s the story on the supply side. On the demand side, industrial appetite for silver is on the rebound. The result: global silver production fell over 4% while demand gobbled up more of the world’s silver reserves. Consider this: in 2016, the most recent year with comprehensive numbers, global silver production fell to 885.8 million ounces. Between industrial demand, jewelry, coins and bars, and silverware, 1,027.8 million ounces of silver were consumed.
The Silver Comeback
Put simply, low silver prices are unsustainable. Sooner than later silver scarcity will become a reality and prices will go up. That’s great for silver miners struggling to make a profit but investing in mines takes time and money. Until supply catches up investors will benefit from high silver prices driven entirely by fundamentals. Once speculators join the fray, silver could be in the midst of a massive bull run. Silver buyers are already anticipating the comeback of silver prices. Customers at silver dealers Silver Gold Bull are now buying more silver than gold.
Buy Silver Now
When prices are low, that’s the best time to buy, especially in conditions like these. How do you know silver prices are actually low right now? Use a metric gold and silver traders love: the silver-gold ratio. Take the cost of one ounce of gold and divide it by the live price of silver today. On April 12, 2018, that number was just over 81. The higher the ratio, the cheaper silver is in comparison to gold. Throughout most of human history, the silver-gold ratio has been closer to 15 according to silver dealer Silver Gold Bull, though over the past few decades, it’s averaged out around 55. The ratio tends to shrink during bull markets because silver grows faster than gold and contracts at the end of bear markets. The returns on silver are much higher than gold, though investors can profit from both.
Get into the silver market with a dealer like Silver Gold Bull before the comeback to maximize your returns. There’s no better opportunity than cheap silver.
