Have you ever wondered why silver is still too low, a condition that keeps happening for the longest time?
Gold is one precious metal that gets the most investment demand. When there is investment demand, it means that people own it since they believe that the price of gold will continue to go up.
On the other hand, silver has two main sources of demand, namely industrial demand and investment demand since this is a form of precious metal. For instance, silver can be used in solar energy in order to create electronic circuits and also as catalyst in the chemical reactions.
Around 56 percent of the use of silver goes to its industrial demand. This is the reason why prices tend to be sensitive when it comes to industrial demand. This also explains why silver and gold don’t trade that tightly with one another.
One more reason is that it is very rare to find silver on its own. As much as 66 percent of silver comes as by product of mining lead, zinc and copper. Silver supply can go up once the companies increase the mining of such metals. This poses you with a situation wherein there is excess supply of silver compared to its demand. Due to this, prices of silver tend to go low even when the prices of gold are rising.
Supply of Silver Find it Hard to Keep Up
What is really happening in the silver market now? Copper is nearing its 6-year low while lead is at its 5-year low. Due to the collapsing prices, the mining companies have reduced the production of the metals. It is not surprising that production of silver is set to go downhill as well. An acclaimed research company has estimated that the production will drop to as much as 13% this 2017.
But, there is a strong demand for silver. The investment demand reached as much as 400 percent from below 50 million ounces back in 2006 up to 200 million ounces during 2015. It is said that the investment demand will continue to soar due to the financial instability and negative interest rates which cause mistrust in the paper currencies.
On top of that, the demand for industrial silver seemed to have increased to around 3 percent in the previous year.
Indeed, there is a rising demand and shrinking supply. The ratio between gold and silver is more than 80, a level in which silver soars from the previous history. It seems that the stars have aligned for this metal to soar. But how high will it be? The silver price could reach $30 per ounce at the very least which is around 100% of the past price.
There are now many reasons to buy silver and invest your money on this precious metal. But, while there are lots of reasons to do so, it is always a good thing to be extra wary of every move you take and every decision you make to ensure that you don’t end up making irreversible mistakes.
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