Silver Prices: The Journey Towards $100 Per Ounce Has Begun

Silver has launched into an orbit of its own. It has risen close to 19% since the Brexit referendum that was held on June 23rd, 2016. It traded above $21.00 per ounce on July 4th, 2016. This is the second time this year that silver has made its intentions clear – i.e. that it is going parabolic.

Is this just a temporary rise, or is this an indication of things to come?

On June 23th, 2016, the U.K. decided to leave the European Union (EU) per the Brexit referendum. This directly effects the U.K. and the EU. However, there are indirect implications for the US as well. Post referendum, the FED Funds Rate indicates that the investors’ expectations of an interest rate hike in the next meeting have plummeted to 0%. Moreover, less than 8% of traders expect any rate hike in 2016.

It is interesting to note that around 20% now believe the FED is likely to reduce interest rates by mid-2016. This supports our view of further easing by the FED, which we have been writing about for months.

The Brexit puts a question mark on the future of the Euro and the U.K. The £150bn injection by the BOE is only the beginning…with a lot more to come. The ECB has announced Negative Interest Rates Policy (NIRP)… and will probably resort to further easing measures.

The Central Banks around the world are competing with each other in debasing their currencies. This is the reason that Jim Rogers, the commodity guru, considers the dollar a highly flawed currency. Imagine if the dollar, considered as the “safe haven”, is indeed flawed, which other currency can be trusted?

I believe that as “The Great Reset” of the monetary system begins, there will be an increase in the demand for silver relative to the increase in the demand for gold. Gold is an “establishment” metal relative to silver. There are no central banks that are hoarders of silver, anywhere, other than JP Morgan. To date there is no one in the “Establishment” who considers silver as money…as of yet!

My readers are well aware that I am extremely bullish on gold for the long-term. During this upcoming crisis, gold and silver are the metals which will offer stellar returns. However, at different times during the next few years, each metal will offer an excellent opportunity to earn handsome financial returns.

Supply and Demand Of Silver

The supply and demand of any asset class determines its long-term price. The table below gives an indication of the supply deficit that exists in silver during the past decade. Barring 2014, demand for silver has always exceeded its supply.

Although the supply of silver has increased, the demand of the ‘white metal’ has also increased, equally.

Gold and silver have maintained their value for thousands of years, and therefore are the only trustworthy asset classes.

The great George Soros has come out of retirement at the ripe age of 85, as he considers that the world markets are in a “bubble”, and believes a crisis is in the offing. He is shorting stocks…and loading up on gold.

Stanley Druckenmiller has already made gold the largest position in his personal holdings.

This shows that the legendary investors are recognizing that the next big opportunity is in gold and silver. Followers of my writings were also long gold and silver, well before this recent rally began.

Another reason for an increase in silver prices is the surge in demand, due to its industrial application.

"Silver has (more room to run) because silver is increasingly used in solar panels now. Something like 10 percent of demand comes from solar panels. Solar panels are a growing source of demand for silver. Consequently, you have got an additional attraction for silver as well, as a commodity investment and also industrial usage," Jeremy Wrathall, mining team leader at Investec, told CNBC on Monday, July 4th, 2016.

Along with it, there are reports of supply side shortages in silver. Due to a sharp drop in commodity prices, production cuts at zinc and lead mines will tighten the silver supply, which is obtained as a byproduct. According to the INEGI, mining production in Mexico is down by 2.8 percent compared to last year. 

Technical Picture Of Silver On The Charts

The charts of silver futures show that it has formed a rounding bottom pattern, which is a reliable bottoming formation. The current run might face some resistance at the $21.50 levels. However, there might likely be either a small correction or consolidation. On a breakout above the resistance, the next pattern target for silver is $29.50. However, silver is likely to overshoot the target, and go to levels of $34.00 in the medium-term.

Price Of Gold & Silver Conclusion

The consistent demand for precious metals proves that the traders do not believe the FED led asset bubble will continue. The rise is being fueled in anticipation. Whenever the next crisis hits, there will be no stopping both gold and silver prices from surging.

The world is on the verge of experiencing a devastating financial crisis, which will also be an excellent opportunity to profit from if you are well prepared. While the world was left in shock post Brexit, those holding metals and bonds are earning huge profits. If you also want to protect your financial future, look no further than the price of gold and silver…and be prepared in advance for any eventuality.

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