US Military Could Boost Silver Demand
The forecast for Silver is for the precious metal to set a a new all-time nominal price record, likely reaching as high as $54 an ounce. Despite silver’s dependency on gold, it does have some distinct fundamentals, too. Here are Peter Krauth’s, (Global Resources Specialist, Money Morning) key drivers for silver prices in 2013:
- The Gold/Silver Ratio: Before the financial crisis, the gold/silver ratio was around 50 (meaning an ounce of gold would buy you 50 ounces of silver) and trending downward. In late April last year silver exploded higher, pushing the ratio down below 30.
That was short-lived, as silver’s dramatic rise was unsustainable. I had said so at the time. The ratio recently returned to a high level near 60. In 2013, look for the ratio to head back down again, meaning silver will rise faster than gold.
On a long-term basis, I think we’ll see this ratio move down closer to 20. So right now, silver is looking rather undervalued relative to gold.
- Four More Years of Obama: The President has been very good for silver prices. In fact, he was so good, he helped make silver the best-performing major financial asset during his first term.
Now that Obama has earned another four years, and Federal Reserve Chairman Ben Bernanke’s still in place and relying heavily on the printing press, I’m fully expecting a repeat performance. Thanks, guys, for more of the same.
- Higher Investment Demand: Physical silver investment demand is growing. Despite a number of existing silver ETFs, the Royal Canadian Mint is launching its own. That has suddenly removed 3 million ounces from the physical market.
The Sprott Physical Silver Trust (NYSE: PSLV) is expanding its size as well, likely having bought 7.5 million ounces of silver to accomplish this. That’s over 10 million ounces in a single month. Meanwhile, the U.S. Mint has sold more silver coins versus gold coins so far this year than in any since the coin program started.
- Higher Industrial Demand: Solar panel demand is exploding and silver is used to make them, of which the average panel requires about two thirds of an ounce. Since 2000 the adoption of solar panel technology has meant a 50% annual increase in silver usage each year, going from 1 million ounces in 2002 to 60 million ounces last year, representing nearly 11% of all industrial demand. Adding fuel to the fire, Japan has recently offered to pay utilities three times the price for electricity generated from solar versus conventional methods.
Unlike gold, silver has a wide range of industrial uses. There’s currently growing demand from an increasing number of industrial applications, including lighting, electronics, hygiene and medicine, food packaging, and water purification, to name but a few. That’s bullish for silver.
So for these reasons, as well as silver’s historical role as an inflation hedge/monetary asset, look for silver prices to keep rising in the years ahead. That being said, 2013 is likely to be pivotal for the more affordable precious metal. Now that gold has set and surpassed its own all-time highs, look for silver to be next. It now looks like $54 is the next price target in silver’s relentless and historic climb.
Precious metals have always been a safe haven for investing in uncertain economic times. Precious metals are assets that will never lose their value. They are not subject to systematic risks as fiat/paper money and hedge/protect your hard earned wealth against inflation and other threats of devaluation. Cornerstone Asset Metals was established to help guide investors safely in and out of the precious metals market.
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Past performance is not an indication of future potential values.
» Read our article: The Best Way to invest in Silver
Past performance is not an indication of future potential values.
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