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Hi Ho Silver! White Metal On Bull Run

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As Peter Schiff put it in his recent podcast, “Hi ho silver seems to be the rallying cry for the day.” (Scroll down to watch the full podcast.)

Last month, we reported silver could be poised to come out of the shadows. It certainly has – in a big way. Silver cracked $17 per ounce Tuesday, hitting its highest level in more than 10 months. On Monday, Bloomberg declared it a bull market:

Silver entered a bull market after climbing to a 10-month high amid positive signs for Chinese industrial demand and decreasing bets the Federal Reserve will raise US interest rates.”

silver chart

The silver price has increased more than 23% since the first of the year, outperforming gold.

Chinese buying has buoyed the silver market. With the Chinese economy stabilizing, many analysts believe this will continue to drive industrial demand for silver. Reuters reported recent heavy silver buying in Shanghai also triggered purchases of gold.

But the silver rally appears to be much more broad-based than that. CNN Money notes buyers in Europe and Asia seeking safe haven are helping drive demand for silver, due to aggressive central bank monetary policy and the proliferation of negative interest rates.  US News summed it up this way:

The money-printing programs of the Federal Reserve, European Central Bank and other similar institutions have some investors increasingly concerned about whether paper money will hold its purchasing power over the long term.”

Silver coin sales demonstrate the robust investor demand for the white metal. Silver bullion coin sales surged in 2015, and they’ve continue to sell at a rapid clip this year, as US News reports:

Investor demand for silver has historically been a driver of prices, rather than its use in industrial processes such as jewelry manufacturing or electronics. One indication of burgeoning investment demand is the market for solid silver coins, such as those made and marketed by the US Mint. Silver coin sales in the first quarter increased 23% from a year ago to 14.8 million ounces, according to a research note from CPM Group.”

The US Mint sold more than 4.1 million Silver Eagles last month, compared with 3.5 million in March 2015. Sales haven’t slowed this month. With a week and a half left, Silver Eagle sales have already eclipsed last year’s April total.  The mint continues to sell out of its weekly allocation Silver Eagles. Sales for the year have now eclipsed 17 million– 26% higher than the same period in 2015.

As we reported last month, the demand for silver jewelry is also strong, and supply is expected to shrink, with mining output projected to fall by as much as 5% year-on-year in 2016.

Jeff Christian, managing partner at consulting firm CPM Group in New York, told US News he sees silver continuing on its bullish path:

We are seeing very strong investment demand and that makes me think silver prices can move higher.”

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