December 16th, 2013
Original Source: Wealth Daily
By: Joseph Cafariello

Excerpts From: Silver Projections for 2014

Time to Buy Silver!  

2014 Supply and Demand

Obviously, supply and demand is always to be considered when projecting future prices.

"As of now," notes Commodity Online, "silver is witnessing good retail and industrial demand."

Much of that demand will come from an expected improvement in global industrial production. "By 2014, a somewhat more sustained recovery is envisaged," the GFMS report indicated. "A global recovery of the auto market and a continued rebound in housing and construction will lift industrial demand for silver to a record 511 million ounces by 2014."

Since "over half of all silver is used to make cars, computers, photovoltaic power systems and… synthetic fibers… an increase in global industrial activity" would predictably result in "an increase in the industrial demand for silver," the report stressed. "Some products [such as electronic pads] did not exist until just a few years ago, so although their individual silver content is modest, they nonetheless represent silver demand that simply did not exist before."

Investment Demand to Continue

Of course, we mustn't omit the investment demand for silver coins and bars, which has surged from China to America and everywhere in between.

Have a look at the U.S. Mint's American Eagle silver coin annual sales (blue line, left axis) from 2006 to present, superimposed over a monthly chart of silver's price (right axis) in the graph below. (Page 2)

When silver prices broke out in late 2007, even a 50% correction the following year couldn't turn investors off the metal, with American Eagle silver coin sales jumping from 9.9 million coins in 2007 to 19.6 million in 2008.

The same has been happening during the current correction.

Despite silver's plunge from $31 at the start of 2013 to some $19 today — a drop of over 38% — American Eagle sales have hit a record 42 million silver coins in a single year, up 24% over last year's sales. Though silver prices are back down to 2008 levels, coin sales are more than double what they were then.


Source: TFC Commodity Charts

The Fed's Contribution to Silver

Yet we have to appreciate that despite robust industrial and investment demand, silver is still a precious metal strongly correlated to gold. And whatever upsets the gold price will upset silver's too… namely the expected upcoming reduction of the U.S. Federal Reserve's monthly bond purchases anticipated to begin at the end of Q1 next year.

Even so, the hit shouldn't last long, nor should it be deep, since the Fed has repeatedly reassured the markets that ultra low interest rates will remain in place for an extended period of time, possibly into 2016 or even 2017.

Remember that the monthly bond purchases were not the cause of silver's and gold's rise from 2001 to 2011, as the purchasing program was introduced in late 2012. It was low interest rates that propelled the metals higher.

Thus, the removal of the monthly buying program will not have a lasting impact on the metals' prices beyond the initial announcement, since the real driver of the metals — low interest rates — will be around for a few years more.

These articles are provided for informational purposes only and were obtained from publicity available sources on the Internet. These articles do not constitute financial advise or trading recommendations by Global Asset Management ("Global"). Global neither warrants the accuracy or completeness of the information contained in these articles, undertakes to update them, nor is it responsible for any omission or error contained in these articles. Viewers are encouraged to conduct, and should only rely on, their own independent research.
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