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Silver Prices: The Ridiculously Simple Reason to Be Bullish on Silver

Monday, January 25, 2016 6:36
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Silver Prices: The Ridiculously Simple Reason to Be Bullish on Silver

Here’s Why 2016 Could Be Great for Silver Prices

So far in 2016, silver prices are flat. This could change. Don’t be shocked if the gray precious metal is severely higher by the year’s end than it currently trades.

Know that in the short-term, silver prices are driven by nothing but sentiment, but in the long-term, fundamentals start to come into play. Right now, we see fundamentals in the silver market turning in favor of the bulls.

Investors Demand For Silver Surging

Often, silver is called an industrial metal. Over the past few years, we have noticed a significant amount of investor demand. We see this as a game-changer for the silver market. Even with all the fears of the global economy slowdown and industrial demand slowing down, investor demand could really give silver prices a boost.

To provide some perspective, just look at the table below. It shows the total number of silver American Eagle coins sold each year from 2009 to 2015.

Year Silver Ounces Sold
2009 28,766,500
2010 34,662,500
2011 39,868,500
2012 33,742,500
2013 42,675,000
2014 44,006,000
2015 47,000,000

Data source: U.S. Mint, last accessed January 22, 2016.

You can clearly see a trend here. From 2009 to 2015, the demand for silver coins (mind you, coins are usually used for investment or gifting purposes) at the U.S. Mint has increased more than 63%.

Also, notice something interesting? After silver prices peaked at $50.00 an ounce in 2011, we have been noticing higher demand. In 2015, silver prices dropped to their lowest level since 2009 and we saw record silver sales.

It has been mentioned in these pages before that other mints are selling a significant amount of silver in coins and bars, too. This is all investor demand. We have also noticed India, a country known for its gold demand, is building an appetite for the gray precious metal as well.

Going forward, it continues to become very evident that the silver supply is in trouble. The reason behind this is very simple. With prices this low, silver producers can’t produce with profit. It’s simple economics; when prices are low, producers pull back on production.

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