James Burgess
Oil Price
Precious metals are an important component of every investor’s portfolio, and while gold often gets all the hype, another precious metal will be a much better bet in 2017: Silver.
The market for silver continues to tighten as supply has failed to keep up with demand for much of the past decade. Silver is used in all facets of modern life, including electronics, medical devices, engines, batteries, solar panels, LED lighting, semiconductors, touch screens, dentistry, and nuclear reactors. The list goes on.
Demand for silver is up by more than 35 percent since 2009, while supply only grew by a little more than 10 percent. In 2015 alone, global demand for silver exceeded supply by roughly 129 million ounces, or about 11 percent of overall demand. With silver consumption set to expand indefinitely, the supply deficit will continue to put upward pressure on prices in the years ahead.
The set-up here is fantastic because indications are that we are on the edge of another bull run at a time when silver mining stocks are significantly undervalued. Silver prices had a good run for most of 2016, but have fallen back in recent weeks as the dollar has strengthened and uncertainty surrounding the U.S. presidential election abated. But the pause in the run up in prices will be brief, offering investors an appetizing entry point for a crucial commodity in today’s globalized economy.
Silver may be down 10% from its peak of $20.67 in Q3, but the sell-offs were based on sentiment, not fundamental reality—and this is exactly where smart investment finds opportunity. The strongest documented indication of this is the Q3 earnings of silver miners, which only the savviest of investors are picking up on. Pan American Silver (NASDAQ:PAAS) reported Q3 earnings of an impressive US$43.4 million—up US$9.2 million over the previous quarter—just for starters.
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1. The Global Silver Lining: A Precious Metal Premium
Global investors are magnetically drawn to precious metals in times of uncertainty and instability. Global tensions are as high as they were in the 9/11 aftermath, when precious metals soared phenomenally as everyone hedged bets against global instability…
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