Welcome to illuminati silver, we tell you
the truth about silver. Today is Friday 16th September 2016 and we
are providing our views on the future direction of silver prices for the remainder of the
year. We had planned to produce this as a single episode, however due to its length
we have broken it down into 2 parts. Part 1 produced today and part 2 on Sunday. Then
next week we shall give our predictions for gold.
How often have we been asked, at what level do you think silver will rise to in 2016?
It is without doubt an interesting and fair question to ask a channel discussing precious
metals. Of course without a crystal ball that actually works, one can only provide an educated
guess, hopefully supported by financial and political analysis.
At the time of writing this report, silver stands at $19.03. Its one year high has been
$20.87 its 3 year high $23 and its 5 Year high $41.23 and its all-time high- $49.45
or many round it up to $50. This compares with a 5 year low of $13.58 and an all-time
low of $1.27 So why are we mentioning these prices? Well
firstly to put into perspective the parameters we are looking at. An all-time high of $50
was achieved on 2 occasions – once under the Hunt Brothers manipulation in 1980 and
secondly under the extreme economic conditions witnessed in 2011 as a result of the 2008
economic crisis. Both occasions were an extremity and despite this, $50 was silvers peak. (OK
we could allow for inflation etc. etc. but these headline figures are important).
Investment decisions are often based on psychology as well as mathematics, trend analysis and
opportunity cost. With Industry currently undergoing a recession, or at best very nominal
growth, be under no illusion that the only parameter that can drive silver prices significantly
higher in the short term – i.e. 1 -2 years is investment demand. Now whether you are
a chartist, fundamentalist, hedge fund or outright gambler, psychology plays an important
part in your price determination. We all know that mining companies in recent years have
been able to reduce their AISC significantly, falling from as high as $30 an ounce to, in
some cases, below $10, with the average resting somewhere between $12 – $16. So at the current
$19, miners are making money, a lot more than they thought they would just 12 months ago
when silver was languishing between $13 and $14 per oz.
So what are we trying to say here? Well in our view, even if there is an economic recovery,
and many believe there will not be, then silver prices have a ceiling because, allowing for
a year of healthy prices i.e at current levels or marginally above, supply can be improved
sufficiently to meet industrial demand, thereby capping prices to little more, in our view,
than $22 – $25 (perhaps marginally beating its 5 year high).
So let’s look at what is likely to be the main industrial driver for silver this year?
Well undoubtedly, many analysts have remarked upon Silver’s use in solar energy technology
as silver plays a key role in photovoltaic (PV) cells. According to renewable energy
research site CleanTechnica, roughly 16 gigawatts (GW) worth of solar panels are expected to
be installed by the end of 2016. That marks a significant increase of 119% compared with
2015 installations. The Silver Institute projects some 70 million ounces to be used for solar
energy this year. In addition a number of other industrial uses
are cited which include: batteries, dentistry, glass coatings, LED chips, medicine, nuclear
reactors, photography, semiconductors, touch screens, water purification and wood preservatives.
However, despite all of these a 1%, 2% or even 3% rise in global productivity will be
insufficient to move prices significantly from current levels.
So what can enable prices to exceed this level during the next couple of years?
Well undoubtedly they are economic and psychological and here are some of these influences: 1. Demand for silver bullion has skyrocketed
in recent years, and that growth is expected to throughout 2016. Sales of the 1 oz. American
Silver Eagle coin – the official silver coin of the United States – have soared
370% since 2007. According to the U.S. Mint – the government agency that controls coin
circulation – Silver Eagle sales hit a record 47 million units in 2015.
What’s even more bullish for silver prices is bullion demand in 2016 was already on track
to outpace last year. As of May 3, roughly 19.6 million Silver Eagle coins had been sold
and predictions of 60 million eagle sales were being touted for the year. However in
July a representative of the Mint allegedly admitted that they were not going to produce
more than 50 million ounces of silver eagles – in other words restricting demand, thereby
potentially uplifting their price in the secondary market.
Consumer demand for coins isn’t just growing in the United States. For example, Australian
silver sales hit 4.28 million ounces in the first quarter of 2016. That marked a 165%
increase from Q1 in 2015, according to Australia’s Perth Mint. It also announced on 20th July
that sales of 2016 Australian Kangaroo Silver Bullion Coins hit the 10 million mark, doubling
expectations. 2. The Federal Reserve’s hesitancy to raise
interest rates will provide another incentive for higher silver prices. Commodities that
are priced in U.S. Dollars benefit from low interest rates. That’s because higher rates
boost the value of the dollar, making dollar-denominated metals like silver more expensive. This makes
silver bullion less affordable to users of other currencies, which reduces demand and
lowers silver prices. At the rate the Fed is moving, it looks like the price of silver
can look forward to lower interest rates for some months to come. So far, Fed Chairwoman
Janet Yellen left rates unchanged due to slowing economic growth. However FED hawks are now
commenting upon a rate rise soon. 3. Movement in the gold/silver ratio will
keep attracting investors to the silver market this year. The gold/silver ratio has traditionally
been one of the more important metrics used in the metals market. It’s used to calculate
the relative values of gold and silver to each other. To find the ratio, you divide
the current gold price per ounce by the current silver price per ounce. The ratio hit record
highs at a peak of 83 during the second week of March, meaning 83 oz. of silver was required
to buy one ounce of gold. That extreme ratio – which has only been reached three other
times since 1996 – seemed to pull the silver price lower until a change of psychology or
temperament kicked in whereby it appeared that all major investors thought – hang
on this GSR is far too high and was corrected very rapidly to current levels.
Since then the gold/silver ratio has plunged to its current 69 -70 range resulting in a
40% increase in silver prices for the year to date. Some investors and commentators believe
that the ratio will fall further and closer to its more traditional level of 55 any time
soon. 4. Demand for physical silver will rise in
2016 thanks to its “safe haven” appeal. A safe-haven investment is one whose value
either increases or remains the same during periods of market volatility. Investors and
traders keep safe havens in their portfolios as insurance against unforeseen drops in the
Dow Jones Industrial Average or S&P 500. Low interest rates and declining stocks push
silver prices higher due to the metal’s appeal as a safe haven for your money. Metals like
silver are considered safe havens because they’re physical assets. Silver prices will
either move sideways or increase when the stock market dramatically dips.
5. Silver jewellery sales are growing, and that’s bullish news for silver prices.
According to the Silver Institute, sales of silver jewellery in the U.S. increased in
2015 for the seventh straight year. Roughly 60% of jewellery retailers saw an average
15% increase in sales. Not to mention nearly 50% of all U.S. retailers said their silver-based
items had the highest turnover rate in 2015. About 87% of U.S. retailers were optimistic
that strong silver-jewellery sales would persist into 2016 and this appears to be the case.
There are several factors that can drag silver prices lower however. Two of the biggest influences
are interest rates and stock market performance. When interest rates rise, silver prices usually
fall because higher interest rates increase the value of the U.S. dollar. A valuable dollar
makes commodities like silver that are priced in dollars more expensive to anyone buying
it with another currency. Similarly, a stock market rally usually pulls
silver prices down because investors like to buy silver as a hedge against market volatility.
When stocks rise, investors spend more money on these more liquid assets than silver.
According to Money Morning Global Resource Specialist Peter Krauth, silver prices are
headed to $22 an ounce by the end of 2016. In Part 2 of this video we reveal our views
on where we see the silver price towards the end of this year.
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updates and offers. Our Facebook page which is updated daily can be found at facebook.com/illuminatisilver Disclaimer: Illuminati Silver owners come from a background
of Banking, International Wealth Management and Economics. Having now retired from these
worlds we are not qualified to give investment advice. Therefore, this and other productions
must not be deemed to be giving such advice and merely represent the personal views of