As I have written in these pages before, I expect silver prices to outperform gold prices in the years ahead. That opinion hasn’t changed.
As gold prices started their flight upwards back in 2002, silver prices followed a similar pattern. Below is a price chart of monthly silver prices since 2001—when gold was trading just below $300.00 an ounce.
Chart courtesy of http://www.StockCharts.com
Silver prices traded as low as $4.00 an ounce in late 2001 and climbed to highs of almost $50.00 an ounce in 2011. While silver prices have retraced a bit, the metal is still up more than 675% from its lows in 2001. Meanwhile, gold prices have risen by about 466%; from $300.00 to around $1,700 an ounce today.
I see a future where silver will become the focus of investors, while gold will be bought by the central banks. We are starting to see that happen at accelerated pace now. You have read extensive articles inProfit Confidential documenting the gold buying of many central banks. And investors are already rushing to buy silver.
To give you some perspective, the U.S. Mint has halted its sales of 2013 American Eagle silver coins, because it ran out of them. Yes, the U.S. Mint ran out of 2013 silver coins! Sales for 2013 silver Eagle coins surpassed five million ounces. (Source: Reuters, January 17, 2013.)
In addition, investors are turning to alternative ways of buying silver. The biggest Exchange Traded Fund (ETF), called the iShares Silver Trust (NYSE/SLV), saw its holdings of silver rise to the highest level in five years. The fund has purchased $579 million worth of silver to bring its total holdings to 10,735 tons.
According to data collected by Bloomberg and Barclays plc, the demand for silver investments is 19,114 tons through exchange-traded funds globally, which equates to about nine months of supply from mines.
This sudden investor interest in silver shouldn’t be surprising to my readers. As central banks print more fiat currency, accordingly, silver and gold prices will rise.
With the economies of many countries suffering, money printing will be the “savior” of choice for central banks, and because of that, I expect to see silver prices increase significantly over the next couple of years.
By Michael Lombardi, MBA for Profit Confidential