Why Silver Is Headed Up!

Monday, February 8, 2016

silver eagle

Silver is one of my favorite commodities to follow, and at the moment, one of my favorite to invest in. In fact, earlier today, I ran down to the local precious metals shop an purchased several thousand dollars worth of the precious metal, and for good reason. Silver is headed up, and it's likely to climb in a big way. Today, we'll talk about the factors that cause growth in silver and why I believe the precious metal is likely to climb from here. So, let's get right to it...

What Causes Movement In The Price Of Silver

Silver is a very interesting commodity. That's because, like most commodities, the price of the precious metal is at the mercy of supply and demand. When supplies are high and demand is low, the value of silver falls. Adversely, when supplies are low and demand is high, the value of the commodity skyrockets. However, there's a twist. Silver is also a safe haven investment. That means that when market conditions are poor, investors flock to silver as a way to keep their investment dollars safe. This increases demand and ultimately the price of the commodity. This is incredibly important to keep in mind when it comes to predicting price movements in the commodity.

Why Silver Is Likely To Climb

As mentioned above, silver is largely at the mercy of three factors.... supply, demand and stock market conditions. Here are the changes in these factors that are likely to lead to climbing silver prices...

  • Supply – First and foremost, let's start with the supply of the precious metal. For several years, the supply of silver has been climbing as production of the precious metal has been growing. However, that is changing, and it's happening fast. Since 2011, the values of precious metals including silver, gold, platinum, zinc, lead, and more have been declining. When it comes to silver, zinc and lead are incredibly important to follow. With that said, the value of zinc and lead have fallen to such low points that mines for these metals are starting to close. So, what does that have to do with silver? Well, just about everything! The reality is that much of the supply of silver around the world is created through zinc and lead mines. In fact, silver is considered a bi-product of these mines. With these mines starting to close as the result of low zinc and lead prices, we're likely to see big declines in the supplies of silver, leading to growth in the value of the commodity.
  • Demand – Demand is another major factor that's seeing some big changes. A great way to gauge demand for silver is to take a look at reports from the United States Mint. Since 1985, the US Mint has been required to produce enough silver coins to meet demand; at task at which they have failed miserably. Nonetheless, their reports do tell us a lot. For example, in the first day silver bullion coins were available in the United States, the Mint sold half of the total number of coins that it sold in the month of January last year! That's a huge spike in demand. Not to mention, demand for silver jewelry and other silver products have been climbing as well. This can be seen in US silver imports. All in all, demand is climbing at a fast pace, and is likely to continue doing so.
  • Market Conditions – Finally, as mentioned above, market conditions play a crucial role in the value of silver. That's because silver is a safe haven investment. When market conditions are negative, the value of silver climbs as demand from investors climbs. Well, take a look at the market my friends. Stocks are doing incredibly poorly, and are likely to continue doing so for quite some time.

The Bottom Line

The bottom line here is that silver has been falling for quite some time. However, the declines in the commodity have brought the value of silver to the floor. Now, it's time to watch as it climbs! 

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.