As 2015 progresses, precious metals are entering their accumulation phase. Several upcoming political factors should push metals higher this year. Three upcoming events to watch this year are the ongoing geopolitical turmoil in the Middle East, the speculation over the Federal Reserve interest rate hiking and the dismal situation in Europe particularly Greece.These three factors should contribute to growth in the metals sector.
Gold continues to re-establish itself to its historic role as real money. Central banks around the world have been quietly increasing gold reserves as a hedge. Russia recently reported that it has quietly accumulated 507 metric tons of gold (3x’s the weight of the Statue of Liberty) in the past decade. Central banks from Japan, China and the U.S. have also been net buyers of the yellow metal.
As much of the media focus has been on gold’s rise, silver has quietly posted gains of 572% in the past ten years making it the top- performing commodity. Many investors are asking themselves should I buy silver in 2015? Here are seven strong reasons to buy silver in 2015 and beyond.
- Silver’s cost of entry is significantly lower than gold. As gold becomes the preserve of wealth of choice for central banks, wealthy investors and large institutions, more individual investors are turning to silver as “the poor man’s gold.” Silver’s lower price allows an investor to build a position over time at a much lower cost.
- Silver has a large built in base in industrial use and medical applications. 85% of silver inventory is used in these applications. Individual investors are in direct competition with these traditional consumers. This alone will impact silver’s price.
- Inventories of existing silver have shrunk significantly over the past 50 years. Above ground silver inventories were estimated to be ten billion ounces in the 1950’s with the majority being held in the U.S. and China. In the past 50 years nearly 90% of this inventory has disappeared. This has resulted in a supply/demand imbalance in the metal.
- Rapid increase of use in technological, industrial and medical application will continue to grow. Silver is one of the most versatile of all metals. It is one of the best conductors of electricity making it in high demand in the rapidly growing technology market. It is the second best reflector of light and much cheaper than number one Rhodium. Its properties as a germ-killing biocide make it crucial in many medical applications.
- China and India have rapidly become net importers of silver increasing supply even as demand shrinks. China and India shared a traditional role as net exporters of silver. As investor and industrial demand have increased, both China and India have begun importing the metal. As these countries continue to grow their middle-class this demand will continue to increase for the foreseeable future and should continue to be bullish for silver.
- As investors have increased in the metals market, companies are increasing their offerings in the “paper” market for silver. ETFs investing in physical silver have increased in recent years as silver’s price has risen. As demand has grown for these products many funds are using derivative products to supplement actual physical holdings. As the investing public becomes more aware of this and their increased financial vulnerability, money should flow out of these investments and into physical silver purchases increasing demand and prices.
- Traditional price ratios between gold and silver in previous bull markets have declined to as little as 10 or 15:1. The price ratio between gold and silver is currently around 60:1. During previous long run bull markets this ratio has dropped to as low as 10:1. This statistic alone shows that the silver bull market has a way to go.
As the bull market in precious metals continues, investors asking the question should I buy silver only need to look at these fundamental factors for an answer The short answer to the question should I buy silver in 2015 is a resounding yes!