Silver is set to make fresh new all-time highs over the next 10 to 18 months. This move will be absolutely violent. However, we can’t rule out silver going lower before it roars higher.
Here is the set-up; it doesn’t really get any better or more certain than this. The majority of silver production comes from base metal mines, and these mines are closing down due to a collapse in price and demand.
The world’s largest zinc and copper mines are literally closing down. In Canada and Australia, we saw zinc mines close due to running out of minerals to mine, so this is not just due to prices, however, we are seeing plenty of those closures as well.
Zinc and copper are expected to run supply deficits this year, however, demand is contracting, so we don’t expect much of a move from these metals in 2016.
For silver, supply will contract this year, but demand is already surging to new highs for investment coins and bullion. Meanwhile, because of all the new uses for silver, we aren’t really seeing a pullback in demand for industrial applications.
The investment thesis is simple: supply is falling and demand is rising, and it will take a base metal rally to cure this. But with the world in recession, we’re not going to see base metals rise.
We’re going to see base metal prices fall further with oil, which may cause even more demand for silver, since the precious metals are seen as a hedge against deflation and central planners.
The metal is also down significantly since 2011, so all of this is happening at the perfect time. Sometime in 2016 or in the first half of 2017, we are going to see fireworks in the silver market.
- Enter a core silver position for the first half of 2016.
- Begin to take positions in primary silver mining shares like Endeavour Silver (NYSE: EXK) and First Majestic Silver (AG).
- December of 2016, we will be releasing Long Call Option trading suggestions.
Share Disclosure: I am long EXK and AG.