Galina Meleger of Endeavour Silver (EXK) was kind enough to forward me the new “Silver Survey Update 2017” from The Silver Institute, that was just released last week.
The report is painting a positive picture regarding the potential for a higher silver price next year based on the estimated supply and demand numbers.
Galina provided a nice summary of factors that should give hope to the silver bulls:
“The GFMS forecast average silver price for 2018 is up 10% to US$18.80 per oz. Key takeaways are that 2017 total supply is flat and mine supply is lower while jewelry and industrial demand are both up. Investment demand was up in the ETFs but down sharply for coin and bar demand, leading to a small physical surplus and flat silver price this year.
Given that silver is primarily a byproduct of copper, lead, zinc and gold mines, and during the recent 5 year bear market for all metals, very few new copper, lead, zinc and gold mines got built, it is clear that silver supply should fall for several years until new by-product supply comes online. Solar photovoltaic cells continue to be the fastest growing aspect of industrial demand but electric vehicles could soon overtake solar!
We note that Canadian mining analysts such as BMO and TD also raised their silver price forecasts to around US$19 per oz next year.”
The positive supply/demand picture looks promising going into next year. Most of you probably know by now that silver has been in a deficit for the better part of the last decade, and it thus seems the tradition is about to pick up again in 2018. With that said, I personally prefer the miners over the actual metal at this moment since I think a lot of the miners have been punished “unfairly” hard during the last couple of months. To me it looks like the miners are pricing in a continued softness in the price of the white metal for some time to come. I have no idea if the future will actually be as bleak as the silver miners suggest, but what I do know is that when you have the chance to buy shares in companies that are trading near 5 year lows, it’s probably a good idea to start building (or re-building) your position…
Could they go lower? Sure. Could they go much higher? Yes, and especially because;
- We are nearing the end of the tax loss selling season.
- The sentiment in the silver sector is atrocious.
- … Major surprises should therefore be to the upside.
I am personally currently in the market with “stink bids”, and have been since about a week ago. Remember, “profits are made when you buy”. Buying low, when it feels the most risky, is actually the absolutely best time to buy. Not only is the potential downside usually limited, but the potential for out sized future profits are at the same time the greatest. The best possible situation during this time of the year is to be able to catch a stock when investors potentially are hitting the bid relentlessly in order to book that tax loss. These investors might not even care that much about getting a “fair” price, but will simply bulk sell it into the market. Especially the closer we get to the end date.