18 May Why Silver Is The Most Undervalued Asset Today
Silver investors have been frustrated with the silver price for quite a long time. Silver is the most undervalued asset in the market today. I will discuss the reasons why a little later. Daily silver is priced in one of two ways on any given day. There is the basic supply and demand model which is by far used most of the time. In this model silver is seen purely as a commodity. Silver is widely used in electric vehicles and renewable energy such as photovoltaic sun panels. There are broad application for its anti-bacterial properties in waste water treatment, medical application and advanced textiles. The other model of pricing silver comes from investment where a more emotional approach is used and silver is seen as a safe heaven asset. The question though is, which one are we using now?
The Supply And Demand Model. From the table to the left we can find some very valuable information on silver courtesy The Silver Institute The first glaring figure to look at is the peak silver supply of 1,064 mil oz ( million ounces ) in 2014. The supply has fallen to 978.1 mil oz in 2020 so far. The Federal Reserve’s production data for April shows a production drop of 11.2% which is the biggest drop in this report’s century-old history. The most interesting figure though is the 2020 ETP ( exchange traded product ) value at – 105.3 mil oz. This is a huge shortage. The big volumes of money flowing into the ETP will force them to buy physical silver at any price to fulfill their mandate. As silver is mostly a by-product of copper, zinc, tin and lead, production are currently plummeting due to the declining world economies. Physical investment is also the highest since 2015. As gold becomes more expensive, investors will start to switch to more affordable silver.
The Safe Heaven Model. The current fiasco in the stock markets are causing investors to start looking at alternative assets such as gold and silver. Evidence of this can clearly be seen from the highest ever cash inflow into exchange traded funds seen recently. From a technical analysis point of view silver on Friday broke a very important resistance level of $14.89 and then $15.84 to close at $16.64. This formation is called an inverted head and shoulder formation and gives us an upside target of $20 to complete. The next short term level silver has to break is $17.50. Whether this is the breakout that will take silver to $50 remains to be seen. The emotional safe heaven status of silver might pretty well have started. If you want to buy silver, now is the time before it is too late.