Why Silver Will Double From Here

August 28, 2013 at 08:57

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As gold bullion prices declined in the period from April to June of this year, so did silver prices.

And just like gold bullion, the bullish case for the white metal’s prices continues to build.

Demand for the white precious metal is not just robust; it is rising. The chart below compares sales of silver coins at the U.S. Mint in the months of January to July of 2012 and 2013.

The demand for the precious metal is strong, having risen by 50% in the first seven months of this year compared to the same period a year ago.

Last week, Chris Carkner, the managing director of sales for bullion, refinery, and exchange-traded products at the Royal Canadian Mint, said, “Year-to-date, after the second quarter, we’ve had record (demand) volume for silver Maple Leafs, the greatest we’ve had in the over 25 years that we’ve produced them…”

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Data Source: U.S. Mint web site, last accessed August 23, 2013

 

Looking at the technical picture, the chart below clearly shows the bottom in silver prices and the new upward-moving price trend.

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Chart courtesy of www.StockCharts.com

 

Yes, prices for the white precious metal are down for the year, but after breaking below $19.00 an ounce, they quickly recovered and found support, as shown in the chart above. Unlike gold, silver prices tested the same support level ($19.00 an ounce) on several occasions, and they always bounced above that level whenever it was tested.

Have silver prices hit a bottom? Price manipulation aside, fundamental demand and technical analysis both make a good case for higher prices ahead.

I think the yellow metal will increase in value and move past its record 2011 high of just above $1,900 an ounce. When it comes to silver prices, I expect price gains from this metal to do much better in percentage terms.

For gold bullion prices to rise 100%, gold would need to rise to $2,800 an ounce—a price level we have yet to see. On the other hand, for silver prices to rise 100%, they would only have to move to $46.00 an ounce—a price level we already saw in 2011. And that’s where I believe we are headed again with the price of the white metal.

I see an opportunity for investors in the major mining stocks. Just like gold stocks, after the recent correction in precious metal prices, the senior silver miners saw their stock prices fall to lows not seen in years. And while the stock prices of the major mining companies have come back a little, there is plenty of value still left in this sector—especially for those producers who are able to take the white precious metal out of the ground at a low price.