The Gold Report: The Washington D.C.-based Silver Institute reports that net silver demand has exceeded net silver supply each year since 2004, with a supply deficit of 113 million ounces (113 Moz) reported in 2013. Why hasn't that trend translated into dramatically higher silver prices?
Sean Rakhimov: First, I don't put much faith in these numbers. For instance, CPM Group has somewhat different numbers. Either way, silver supply and demand have been roughly in equilibrium, in my opinion, over the past decade or so. Second, silver manifests itself as a precious metal in times of crisis or uncertainty. When it's business as usual, silver acts more like a base metal and trades more on supply and demand numbers. Silver prices will respond during a crisis as its perception changes from an industrial to precious metal. That's when you will see more of what we saw in 2011 when in the space of about six months silver went up three times. Another period like that is coming.
TGR: In early June we started to see stronger precious metals prices and that has carried through. Is this a trend?
SR: It is the beginning of a trend. Precious metals characteristically start going up after a prolonged decline, yet early in the reversal they rarely inspire any confidence because the last dozen or so similar moves fizzled after a 1020% move. This could be one of those. Silver is at $21 per ounce ($21/oz) now, maybe next week it will test $18/oz again. It's anybody's guess but I believe that toward the end of the year we'll probably see higher numbersmaybe substantially higher.
TGR: Is there a telltale sign that shows investors that this upturn is real? [Read more...]