Welcome to illuminati silver, we tell you the truth about silver.
Today is Friday 16th September 2016 and we are providing our views on the future direction
of silver prices for the remainder of the year.
We had planned to produce this as a single episode, however due to its length we have
broken it down into 2 parts.
Part 1 produced today and part 2 on Sunday.
Then next week we shall give our predictions for gold.
How often have we been asked, at what level do you think silver will rise to in 2016?
It is without doubt an interesting and fair question to ask a channel discussing precious
metals.
Of course without a crystal ball that actually works, one can only provide an educated guess,
hopefully supported by financial and political analysis.
At the time of writing this report, silver stands at $19.03.
Its one year high has been $20.87 its 3 year high $23 and its 5 Year high $41.23 and its
all-time high- $49.45 or many round it up to $50.
This compares with a 5 year low of $13.58 and an all-time low of $1.27
So why are we mentioning these prices?
Well firstly to put into perspective the parameters we are looking at.
An all-time high of $50 was achieved on 2 occasions – once under the Hunt Brothers
manipulation in 1980 and secondly under the extreme economic conditions witnessed in 2011
as a result of the 2008 economic crisis.
Both occasions were an extremity and despite this, $50 was silvers peak.
(OK we could allow for inflation etc. etc. but these headline figures are important).
Investment decisions are often based on psychology as well as mathematics, trend analysis and
opportunity cost.
With Industry currently undergoing a recession, or at best very nominal growth, be under no
illusion that the only parameter that can drive silver prices significantly higher in
the short term – i.e. 1 -2 years is investment demand.
Now whether you are a chartist, fundamentalist, hedge fund or outright gambler, psychology
plays an important part in your price determination.
We all know that mining companies in recent years have been able to reduce their AISC
significantly, falling from as high as $30 an ounce to, in some cases, below $10, with
the average resting somewhere between $12 - $16.
So at the current $19, miners are making money, a lot more than they thought they would just
12 months ago when silver was languishing between $13 and $14 per oz.
So what are we trying to say here?
Well in our view, even if there is an economic recovery, and many believe there will not
be, then silver prices have a ceiling because, allowing for a year of healthy prices i.e
at current levels or marginally above, supply can be improved sufficiently to meet industrial
demand, thereby capping prices to little more, in our view, than $22 - $25 (perhaps marginally
beating its 5 year high).
So let’s look at what is likely to be the main industrial driver for silver this year?
Well undoubtedly, many analysts have remarked upon Silver's use in solar energy technology
as silver plays a key role in photovoltaic (PV) cells.
According to renewable energy research site CleanTechnica, roughly 16 gigawatts (GW) worth
of solar panels are expected to be installed by the end of 2016.
That marks a significant increase of 119% compared with 2015 installations.
The Silver Institute projects some 70 million ounces to be used for solar energy this year.
In addition a number of other industrial uses are cited which include: batteries, dentistry,
glass coatings, LED chips, medicine, nuclear reactors, photography, semiconductors, touch
screens, water purification and wood preservatives.
However, despite all of these a 1%, 2% or even 3% rise in global productivity will be
insufficient to move prices significantly from current levels.
So what can enable prices to exceed this level during the next couple of years?
Well undoubtedly they are economic and psychological and here are some of these influences:
1.
Demand for silver bullion has skyrocketed in recent years, and that growth is expected
to throughout 2016.
Sales of the 1 oz.
American Silver Eagle coin – the official silver coin of the United States – have
soared 370% since 2007.
According to the U.S. Mint – the government agency that controls coin circulation – Silver
Eagle sales hit a record 47 million units in 2015.
What's even more bullish for silver prices is bullion demand in 2016 was already on track
to outpace last year.
As of May 3, roughly 19.6 million Silver Eagle coins had been sold and predictions of 60
million eagle sales were being touted for the year.
However in July a representative of the Mint allegedly admitted that they were not going
to produce more than 50 million ounces of silver eagles – in other words restricting
demand, thereby potentially uplifting their price in the secondary market.
Consumer demand for coins isn't just growing in the United States.
For example, Australian silver sales hit 4.28 million ounces in the first quarter of 2016.
That marked a 165% increase from Q1 in 2015, according to Australia's Perth Mint.
It also announced on 20th July that sales of 2016 Australian Kangaroo Silver Bullion
Coins hit the 10 million mark, doubling expectations.
2.
The Federal Reserve's hesitancy to raise interest rates will provide another incentive for higher
silver prices.
Commodities that are priced in U.S. Dollars benefit from low interest rates.
That's because higher rates boost the value of the dollar, making dollar-denominated metals
like silver more expensive.
This makes silver bullion less affordable to users of other currencies, which reduces
demand and lowers silver prices.
At the rate the Fed is moving, it looks like the price of silver can look forward to lower
interest rates for some months to come.
So far, Fed Chairwoman Janet Yellen left rates unchanged due to slowing economic growth.
However FED hawks are now commenting upon a rate rise soon.
3.
Movement in the gold/silver ratio will keep attracting investors to the silver market
this year.
The gold/silver ratio has traditionally been one of the more important metrics used in
the metals market.
It's used to calculate the relative values of gold and silver to each other.
To find the ratio, you divide the current gold price per ounce by the current silver
price per ounce.
The ratio hit record highs at a peak of 83 during the second week of March, meaning 83
oz. of silver was required to buy one ounce of gold.
That extreme ratio – which has only been reached three other times since 1996 – seemed
to pull the silver price lower until a change of psychology or temperament kicked in whereby
it appeared that all major investors thought – hang on this GSR is far too high and was
corrected very rapidly to current levels.
Since then the gold/silver ratio has plunged to its current 69 -70 range resulting in a
40% increase in silver prices for the year to date.
Some investors and commentators believe that the ratio will fall further and closer to
its more traditional level of 55 any time soon.
4.
Demand for physical silver will rise in 2016 thanks to its "safe haven" appeal.
A safe-haven investment is one whose value either increases or remains the same during
periods of market volatility.
Investors and traders keep safe havens in their portfolios as insurance against unforeseen
drops in the Dow Jones Industrial Average or S&P 500.
Low interest rates and declining stocks push silver prices higher due to the metal's appeal
as a safe haven for your money.
Metals like silver are considered safe havens because they're physical assets.
Silver prices will either move sideways or increase when the stock market dramatically
dips. 5.
Silver jewellery sales are growing, and that's bullish news for silver prices.
According to the Silver Institute, sales of silver jewellery in the U.S. increased in
2015 for the seventh straight year.
Roughly 60% of jewellery retailers saw an average 15% increase in sales.
Not to mention nearly 50% of all U.S. retailers said their silver-based items had the highest
turnover rate in 2015.
About 87% of U.S. retailers were optimistic that strong silver-jewellery sales would persist
into 2016 and this appears to be the case.
There are several factors that can drag silver prices lower however.
Two of the biggest influences are interest rates and stock market performance.
When interest rates rise, silver prices usually fall because higher interest rates increase
the value of the U.S. dollar.
A valuable dollar makes commodities like silver that are priced in dollars more expensive
to anyone buying it with another currency.
Similarly, a stock market rally usually pulls silver prices down because investors like
to buy silver as a hedge against market volatility.
When stocks rise, investors spend more money on these more liquid assets than silver.
According to Money Morning Global Resource Specialist Peter Krauth, silver prices are
headed to $22 an ounce by the end of 2016.
In Part 2 of this video we reveal our views on where we see the silver price towards the
end of this year.
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Disclaimer:
Illuminati Silver owners come from a background of Banking, International Wealth Management
and Economics.
Having now retired from these worlds we are not qualified to give investment advice.
Therefore, this and other productions must not be deemed to be giving such advice and
merely represent the personal views of its owners.