After nearly three consecutive years of declining silver prices, experts are reluctant but force to conclude that bear market is definitely running out of steam. Firstly, from a historical perspective, it appears that there were seven recorded bear markets over the past four decades and four of them lasted longer and three were a lot shorter. The four out of seven declined less last week and the two were on average the same and only one was substantially much deeper.
Over the past forty years, there has been no bear markets in existence that would extend the low past this recent October. It appears to safely assume that the end of the down cycle is nearing in or close. Below are statistical evidence that the end of the silver bear market is inevitable.
1. The U.S. Mint can no longer keep up with demand
The sharp plummet in the price of silver last year let loose a wave of pent-up demand for silver coins which in turn resulted in dire response from investors. The question is simply if such record levels could persist to be supported, it still appears to be a difficult matter of discussion.
The U.S. Mint was able to sell 13,979 ounces in the first quarter which was less than 14,223, 000 sold in the first quarter last year. However, the January decline of 36 % from its previous year was much more hefty with the mint not beginning its sales until the end of the second week of the aforementioned month. The monthly total therefore reflects only 2.5 week’s worth of sale.
2. Silver ETFs have incurred net flows once more
Silver ETFs’ holdings were largely unexcitingly flat last year as compared to the mass departure seen in gold funds. The pattern is seen as a continuation for this year. Moreover, holdings in silver exchange-traded products (ETPs) were on the rise 3.5 % year to date which was in addition to the current 17.5 million ounces. In fact, the net purchase by silver ETPs have garnered a total of $354 million YTD, the biggest influx of all commodity ETPs. Meanwhile, gold-backed ETPs have encountered sales of 500,000 ounces approximately 1 % drop in total.
3. Jewellers keen on low prices
Low silver prices have resulted to a surge in silver jewellery purchases. A very good example is the U.K. reports pertaining to jewellery sales jumping 40.4 % during the first quarter to 351,791 items overall.
4. India’s incessant purchases
India was able to import a total of 5,500 tons last year which was 180 % more than two years ago. Imports encompass 20 % of all global demand. A month prior, silver’s imports were 250 % lower and this was 250 % lower. This was a result to the recent increase in import duties and the granted permission of the six banks to import gold which was geared towards softening purchases. Hence, this is perhaps the feasible reason why silver price were still struggling and as long as politicians maintain gold restrictions in place, India will continue its silver purchases.
5. China: Additional silver for solar
Imports of silver rose dramatically during the first quarter by almost 75 % month on month and 90 % year on year to 358 tons which was considered the highest in more than three years. Although it was revealed to be much lower in the course of a few months back, the imports during the final month of the first quarter were up 16 % year over year. It remarkable to note that prices increased in February and diminished in March which is indicative that Chinese demand affects the present prices.
6. Supply sources are alarming
- By far, suppliers were able to meet demands yet, there are still uncertainties ahead:
- There are very few excess supply that is expected this year as production is predicted to remain stable and demand presently shows no signs of letting up.
- Solar power accounts for 29 % of additional electricity capacity in North America last year which simply means that more solar technology has been installed in the U.S. in the past 18 months as compared in the last three decades which many experts view as an eventual consequence in the future.
- Supply from recycling will most likely be weak mainly because it is no longer cost effective in recovering every piece of silver from cellular phones, casino chips or prescription eyewear. A surprising survey revealed that an estimated 130 million Americans disposed their cellular phones which approximately contained 46 tons of silver.
- Many major base-metal mines are expected to exhaust its resources over the course of a few more years. The problem here is that more than 2/3 of silver is actually a byproduct from base-metal operations, and if the present output fails there will be consequently fewer silver.
- According to the Silver Institute the demand for industrial products coming from silver continues to expand its production.