Since peaking in 2011, precious metals have fallen off the cliff and silver has been leading the decline. Year-to-date, silver has lost an incredible 35%, shedding more than 12% in just one week in April. In fact, silver has lost so much glitter that it is now cheap, and over the long run it is an almost-perfect contrarian play. These low prices have created unique opportunities to buy silver and silver miners at rock bottom prices.
Silver prices slated to recover
There are four reasons to believe that the price of silver has bottomed and is on the way up:
- Industrial demand. Silver can withstand high temperatures, is an excellent conductor of heat and electricity, and is very malleable. This makes it an ideal material for a wide range of industrial applications, ranging from electronics, to batteries, to superconductors, and even to medicine. The Silver Institute estimates that the demand for industrial silver will reach a new record high in 2014.
- Jewelry. Globally, jewelry manufacturers use twice as much silver as gold and the demand is expected to continue strong as the worldwide economy recovers.
- Emerging markets. Silver demand is surging in India since the government placed restrictions on the import of gold. China demand for silver has grown by over 100 million ounces over the last decade and is likely to continue to increase.
- Silver Coins. Investors are snapping up the American Eagle silver coins as fast as they can be minted. The US mint sold a record 24 million ounces of silver coins during the first half of 2013, causing the mint to temporarily halt sales because it ran out of silver bullion!
Easy way to buy bullion
One of the easiest ways to cash in on the potential silver bonanza is to buy bullion by purchasing iShares Silver Trust (ETF) (NYSEARCA:SLV). One share of this ETF tracks the price of one ounce of silver bullion. The shares are backed by silver held in banks in London and New York. This fund is very liquid (average 12 million shares per day) and has an expense ratio of only 0.5%.
Silver stocks will rocket higher
As silver recovers, silvers miner prices will rocket higher even faster than bullion. I have identified three miners that are highly leveraged to the price of silver. These firms are described below and all of them should benefit greatly from higher silver prices.