Silver Price Charts and Other Factors Say Now Is Time To Buy

by Vronsky, DailyReckoning.com

Part 1

The Hebrew word for Silver is the same word that is used interchangeably for Money in the Torah and Old Holy Bible Testament: Silver metal = Kesef (כסף), which also means Money.

Moreover, in all Hispanic countries the word for money is the same word for silver: PLATA.

Since 1000 B.C. to today, the word SILVER is synonymous with MONEY in most countries in the world. Further testament was Stock Market genius of the 1920s, who was right on the money when he said:

“SILVER and GOLD have worked down from Alexander’s time…When something holds good for two thousand years, I do not believe it can be so because of prejudice or mistaken theory.”

(Bernard Baruch, a 1929 and aftermath winner)

Silver’s Sterling History

Silver was first mined about 3000 B.C. in Anatolia (modern day Turkey). These early lodes were a valuable resource for the civilizations that flourished in the Near East, Crete, and Greece throughout antiquity. Later, Spain became the capital of silver production. The Spanish mines were the major supplier for the Roman Empire and an essential trading component along the Asian spice routes.

However, no single event in the history of silver rivals the importance of the discovery of the New World in 1492 by Christopher Columbus. This momentous finding and the years that followed reinvented the role of silver throughout the world.

The Spanish conquest of the New World led to mining of the silver element that dramatically eclipsed anything that had come before that time. Between 1500 and 1800, Bolivia, Peru and Mexico accounted for over 85 percent of world production and trade. To be sure most of the silver was stolen from the Inca Civilization in Peru. During 1500s the Spaniards had taken (ie robbed) 16,000,000 kilograms of silver from Peru, which they arrogantly used to finance the conquest of all of Europe.During 1500s the Spaniards had taken 16,000,000 kilograms of silver from Peru.

Major Silver Producers

Silver mining is widespread among countries around the world, from South America to Asia and Africa. The white metal finds value as both a precious metal used to make jewelry and coins; and as an industrial metal used in cellphones and solar panels. What some investors might find interesting is that silver is produced by and large as a by-product of metal, mined alongside other commodities like copper, lead and zinc, rather than coming from primary silver production.

(Source: The Silver Institute)

However, in 2013 Peru became the world’s largest producer of silver, mainly due to a decrease in silver production in Mexico.

Growing Silver Consumption

Demand for SILVER is tremendously increasing through industrial usage, medical applications and especially speculative investments. Moreover, silver Is Used Up 90% And Ends Up In Landfill…unlike gold.

Most people are unaware of the vitally important role silver plays in your everyday live. World consumption has never been higher and for good reason. Here is just a brief list of some important uses of silver:

• Jewelry
• Electronic devices
• Silver Oxide Batteries
• Piping
• Water filtration and Medical Uses
• Solar Panels

SILVER Demand Exceeds Mine Production

The growing Demand/Production Deficits will indubitably fuel SILVER PRICES to ever more record highs in 2014 and beyond as SILVER DEMAND EXCEEDS MINE OUTPUT chart:

To be sure Economics-101 dictates that when yearly demand far outstrips supply (creating annual deficits), the price of the commodity must inevitably rise…indeed eventually soar.

All the above Fundamental Factors Project Much Higher Silver Prices

This begs the question of how high might silver prices might fly in the next few years based upon historical Technical Analysis. The following silver price chart covering 1974 to the present provides astounding insights to a price projections for the poor man’s gold. The silver chart below shows a classic long-term Cup&Handle Formation covering a little more than three decades.

The theoretical price objective of this giant Cup&Handle Formation projects a possible silver price objective of $100/oz in the next 1-3 years…time horizon dependent upon volatility.

FURTHERMORE, it is the considered opinion of this analyst that silver may well far surpass the above $100 Silver Forecast based upon factors that I will elaborate in detail in Parts 2 & 3 of the analysis entitled, Silver Price Charts & Other Factors Say Now Is Time To Buy.

Part 2

“Las Lágrimas de la Luna” could well reach $500/oz in the next few years. This expression is how ancient Incas of Peru referred to silver…”Tears From The Moon.” Although silver production is globally widespread, tiny Peru is the world’s largest silver producer. However, many mining companies contribute to world silver production.

Here are the World’s 20 Largest Silver Producing Companies

Silver Reserves By Country

The world silver reserves are estimated to be around 530,000 tonnes. The countries with the largest silver reserves are Peru (120,000 tonnes), Poland (85,000), Chile (70,000) and Australia (69,000). Over the past ten years there was a steady increase in silver mine production. Even though mining companies were excavating more and more silver, the mine production could not meet the demand. Therefore, this gap has to be closed by reusing scrap silver. However, recycling silver is difficult for three reasons. First, the amount of silver used in some applications is very small. Second, other applications that contain silver such as solar panels have a long life cycle. Third, a great deal of silver in computers, cell phones and TVs is discarded

Silver Demand Characteristics

By geographical area, the United States is the largest consumer of silver. It is also the largest consumer of silver jewelry. Over the last couple of years demand to buy silver as jewelry has remained strong, as gold remained at high prices, leading consumers to substitute. The next largest silver consumers are China, Japan, India and Germany.

Silver Price History

Long-term silver price trend with charts

Silver is way below its nominal record price of $50 in 1980. It is even further below the government inflation adjusted level of $135.  And if you use REAL inflation adjusted numbers, like Shadowstats, the REAL 1980 inflation adjusted price of silver would have to be $450!  Silver is a precious and depleting resource – and when you look at the price of housing, cars, education, food, energy, taxes, insurance back in the 1980′s, it is insane to think that silver is so cheap on any level.  Especially when the uses of silver have skyrocketed since the 1980’s.  It is now used in technology on a massive scale and is even now said to cure cancer.    (Source:  SilverShield)

$500 SILVER LOOMS

I am old enough to remember when silver was $1.39/oz (1940s to 1960s). And when the investing world ‘discovered’ the shiny white metal…it went parabolic from $1.39 to nearly $50 (intra-day).

From 1964 silver enjoyed a ballistic ride to Jan1980…..during that period silver soared nearly 3,500% (ie soared 36 times!)…a 34% CAGR.   Were we to see a déjà vu all over again (thank you Yogi Berra), the silver ‘phoenix’  will have topped $700/oz.  Skeptics might ask: IS THIS POSSIBLE?

I SAY YES for several reasons:

• If it happened before it can occur again.
• There was no Internet communication in the earlier period. TODAY’S Instant international  marketing makes global dissemination of ideas and information real-time communication.
• History is testament that in 1980 only 5% of global investors had any form of precious metals. Moreover, recently precious metal experts state only 1-2% of global investors own today any form of precious metals. And although I am not certain, I suspect the majority of current investors own GOLD RATHER THAN SILVER. This can all change via mass Internet marketing of silver with a view to educate and illuminate the ignorant billions of international investors.
• President Obama’s grandiose socialist plan financed by a National Debt of $17 TRILLION…estimated to rise to $22 TRILLION by the time he leaves the white House, will force the Fed to sharply devalue the greenback in order not to default on the National Debt.
• Pension Plans, Insurance & Bank Trust Depts. are slowly waking up to the heretofore spectacular investment performance of silver vis-à-vis fiat investments….ie Stock, Bonds and plain old Cash. I will elaborate in detail about this in Part 3 of this Silver Analysis.
• And then there is the insatiable demand by China and India with nearly 2.5 Billion population.

Here are several facts why the white metal will again forge all-time record highs:

• China’s and India’s insatiable demand for the white metal continues growing
• Yearly Consumption/Production ratio demonstrates acute deficits
• Unlike gold…silver is consumed by industrial and medical usage
• Silver’s global mining production shows a pathetic 2.8% CAGR during the past 10 years
• Investment demand for the white metal will go ballistic…once the present consolidation ends
• Currency Devaluation Contagion will soon engulf the world, thus fuelling all precious metals higher
• Sales of US Minted Silver coins are at all-time record highs…despite the recent correction in value
• Mexico is currently considering making SILVER the national currency…rather than the fiat peso
• A growing number of states are seeking shiny new currencies made of silver and gold
• Utah and Arizona state legislature recently recognized silver and gold as legal tender. Furthermore, other states considering legislation to make gold bullion and silver bullion legal currency are Montana, Colorado, Idaho, Indiana, New Hampshire, Georgia, Washington, Minnesota, Tennessee, and Virginia.

Based upon all the above criteria and rationale, I conservatively estimate silver might top $500/oz by the year 2020.

Note: This originally appeared on Silver Phoenix 500.