Silver Bull Market Gaining Strength – Mind The 3 Signals

The price of silver is closing today’s COMEX trading session near $22.2, up $0.14 on the day. Silver closed London Fix at $22.09 and €16.15.
Year-to-date, silver is down 26.6%. It is trading 55% lower than its peak of $48.70 high on April 28, 2011.
Although the sentiment surrounding the metals is awful in the Western investment community, increasingly silver is showing strength. In this short article, Jeff Clark from Casey Research lays out the signals of strength underpinning the silver market.

Signal #1: SLV holdings slightly growing amid a mass exodus in GLD

Although the price of the silver ETF “SLV” is down 28.1% year to date, there are no outflows of the grey metal. That is in sharp contrast to the the major gold ETF, GLD, which lost 1/3d of its physical gold holdings since the beginning of this year.

SLV_holdings_february_september_2013

If the bull market in precious metals were over, one would think both funds would see massive selling and outflow of metal from the crash in prices. That hasn’t happened, and this lack of selling by retail and even institutional investors shows just how confident they are in the long-term prospects for the metal.

Some investors may be buying silver because they believe the economy is improving, since roughly half of silver’s use is industrial. But the low fluctuation in fund holdings implies the make-up of investors hasn’t shifted that much—i.e., most of the investors that bought earlier for monetary reasons remain invested. If they believed those selling their GLD shares were correct, they’d be selling their silver too. They’re not.

Signal #2: India choses for silver as gold imports are blocked by non-stop restrictive measures

India has imported 128.6 million ounces of silver between January and August of this year. That is double the imports of 2012 (whole year), when 61 million ounces were imported. The imports of this year equal 16% of the globally mined silver in 2012, which was 787 million ounces.

silver_imports_india_2008_2013

Casey Research believes this trend will continue:

  • The Diwali festival, one of the most favorable events for purchasing precious metals jewelry and gifts, gets under way in early November
  • A strong monsoon season boosted agricultural harvests this year, increasing disposable incomes

It is thus reasonable to suggest that India will import more than 20% of last year’s total worldwide silver production, and that imports will exceed 2008’s record year of 161.6 Moz.

It’s true that some of the jump in silver demand is a result of the anti-gold steps taken by the Indian government. Their interventions have squeezed supplies and made gold more expensive and more difficult to obtain—and some citizens have naturally turned to silver as a substitute.

Signal 3: Very strong silver coin sales

The annual US Mint sales of American silver Eagles shows exceptional strength in 2013. The chart tells it all:

silver_coin_demand_2008_2013

Besides, Jeff Clark writes: “The Royal Canadian Mint reported that “year-to-date, we’ve had record volume for silver Maple Leafs, the greatest we’ve had in the over 25 years that we’ve produced them. This is interesting, the spokesperson added, because the Northern Hemisphere summer is traditionally a slow time for coin and metal sales, but that’s not the case this year.”

Conclusion

The evidence suggests that the bull market in precious metals is far from over—in spite of the mainstream media ignoring the strong trends underpinning this market. If it were time to exit this industry, we wouldn’t see SLV holders refusing to sell, Indians buying record amounts of silver, and retail investors hoarding silver bullion at historic levels.

 

Casey Research offers a generous discount from one of our recommended bullion dealers on silver Maple Leafs—a discount you won’t find anywhere else. Just sign up for a risk-free trial subscription to BIG GOLD, and you may be able to pay for your subscription from the savings.

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