What’s Really Behind The Silver Bull Market

It’s no secret that there’s a lot of optimism for silver investors right now. And who can blame them? Silver has shown vivid signs of life. Moreover, the silver price so low in its ratio to gold right now that many people expect it to finally show an uptick simply because the current price can’t hold out for long.

But when we talk about short-term price increases, what’s really behind that? Is it simply more confidence in silver, or are there deeper causes taking place? Let’s zoom in and find out what might really be behind this silver bull market, and determine whether or not those reasons are here to stay.

A Shift in Supply

Anyone familiar with the laws of supply and demand knows that as demand increases or as supply decreases, prices will generally go up. In the case of silver, supply has dipped. With the output from mines decreasing for the first time in about five years, silver is becoming more scarce, which, over the long haul, might translate to higher prices for the precious metal.

According to CPM Group, as quoted by Bloomberg, this could be a pivotal year for silver. Demand for silver is constantly moving upward thanks to its uses in jewelry and electronics, and with supply dipping as of late, that can only translate to higher prices, if investors are smart enough to see it. With silver’s activity as of late, it appears that investors are beginning to see it.

Will Silver Continue Its Current Trend?

When you read all of this investing news, it’s easy to figure that silver is headed for a long-term bull market. After all, the laws of supply and demand seem to predict it almost directly.

But as any wary investor knows, it’s rare that it’s so easy to predict any commodity, or any stock, will definitely go up in price.

So what are the indications that silver will continue its current trend? For that, we turn to CNBC and their recent news piece saying “Expect silver to stay strong.” More specifically, we turn to Todd Gordon as he told CNBC that silver is “free from the ceiling” and is “ready to move higher.” Gordon’s perspective goes as far back as 2012, seeing that the trend appears to have broken a barrier that will allow silver to break out of its previous rut.

Looking For Silver Demand

A change in silver supply is not the only thing affecting the silver market. Increased demand out of China and a potential weakened U.S. dollar, in which silver is priced, for 2016 suggest that silver’s current rise might be in it for the long haul. And there’s one other aspect to watch for: the potential of central banks to keep interest rates low and maybe even take them negative. With negative interest rates, precious metals will become a much more affordable way to store wealth. This is typically seen as a boon for gold, which is a more physically efficient store of wealth, but silver shares many of these same properties on a smaller scale.