Few Realise How Undervalued Silver Is At Current Prices

Though silver unfortunately was the worst performing precious metal in 2013, I am convinced that this year will be an entirely different matter.

Few people realise how undervalued this metal is at the current prices and many analysts believe that 2014 could bring increased silver market strength, as well as higher prices.

As in the case of gold, silver prices came under massive selling pressure by traders using futures contracts and options on Comex. This artificial supply that will never be delivered was orchestrated by the major bullion banks in an attempt to suppress the price of silver. This selling of paper contracts does not reveal the true fundamentals of the silver market which remain extremely bullish.

After much speculation about when — and by how much — the US Federal Reserve would reduce its bond-buying program, the central bank announced plans at the end of December to lower it by $10 billion, to $75 billion a month, in January.

This will lead to a weakening of the US dollar relative to most of its peers which is positive for silver. Also, if the latest economic figures are correct and there are signs of an improving US economy the increased strength in the nation’s economy means that industrial demand for the white metal could pick up, raising silver prices in the process.

The current price for silver is extremely low and during the third quarter of 2013, silver mining costs averaged $21.39 per ounce. If these low prices persist, mines will eventually close reducing the amount of silver on the market. In turn, that lack of supply should push prices up.

Perhaps of more significance is the level of demand. China and India, are importing increasing amounts of silver. Demand for physical silver into India increased dramatically throughout 2013, leaving market participants wondering if the country would import more than the record 5,048 metric tons of silver it brought in back in 2008.

Recently, Bloomberg reported that Turkey imported 41.6 metric tons (MT) of silver in December, the largest amount since at least 1999. That brought the total amount silver imported by the country in 2013 up to 227.8 MT, a 60% increase from 2012 and much higher than the 42.1 MT Turkey imported in 2011.

Meanwhile, while there has been a drain of gold from the Western ETFs and Funds, this is in sharp contrast to silver, which has had about 992 net tons added. And, the demand for silver bullion coins especially the US Eagle has set new records.

While on a percentage basis silver has had a worse price performance last year compared to gold, there has not been any panic selling at all. On the contrary, there has been a substantial increase in demand.

It is clear that the silver and gold market is being manipulated by some big players. But, all manipulations end, eventually. Ultimately, the price of silver is headed much higher, and so, take advantage of the current low levels.


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