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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

March 2019 - Week 1 Edition

Silver is Up 11% from November 30 to February 28 – About 10 Times the Gains in Stocks

Silver has enjoyed a “stealth” bull market since last November. After dipping below $14 on November 14, 2018 (with a London price setting at $13.97), silver rose more than $2 per ounce (+14.8%) to $16.035 on February 20, 2019 – up over 14% in 14 weeks.  Using end-of month prices, silver is up 11% from the end of November to the end of February, vs. only about 1% for the major stock market indexes.

Gold’s numbers are also strong, but less impressive than silver. Since the mid-November lows, gold rose 12.3% from $1,197.55 (November 13, 2018) to $1,345 on February 20, 2019. Using month-ending prices, gold rose 7.75% from the end of November 2018 to the end of February 2019 (vs. +11% for silver).

Silver tends to go up faster than gold in rising markets, but it also tends to decline faster during bear markets.  Part of that is due to silver’s smaller market. Silver is gold’s “little brother” in terms of lower trading volume based on the lower total value of each metal’s annual new supplies.

Specifically, about 950 million new ounces of silver are added to global supply from mining each year. At $15 per ounce, that’s a $14 billion market. By comparison, gold adds about 120 million ounces a year – just one-eighth of the weight of new silver supplies, but since gold is valued at around $1,300 per ounce, gold’s market size is $156 billion per year, about 10 times the size of the silver market. This helps silver leverage the gains or losses in gold, and this is why silver often looks like it trades like “gold on steroids.”

Another advantage of silver over gold is that silver has more industrial uses than gold. Silver’s high conductivity to electricity and heat makes it valuable in countless industrial usages. Silver is used in making solar cells, computer touch screens and medicine, as well as in jewelry and tableware.

On the supply side, silver is usually only mined as a byproduct of a search for other metals – notably copper, gold, lead and zinc. Due to the low prices of copper, zinc and many other key commodities, mining exploration is down this year. The expected new silver supply in 2019 is 26,000 metric tons (836 million Troy ounces), the lowest new supply since 2013, according to estimates by Societe Generale SA.

High and Rising Silver Demand Caused the Mint to “Sell Out” on February 21

There is also high and rising demand from new buyers for silver as an investment metal, lower-priced and therefore more affordable than gold. Demand for the American Silver Eagle coins reached 4,017,500 ounces in January 2019, up 24.2% from January 2018 and 720% above December 2018 sales. The January total of silver coin sales was the highest of any single month since January 2017. 

The figures for February were just released and we see signs of continued strong demand for silver – despite the fact that the Mint ran out of 1 oz. American Silver Eagles on February 21.  American Silver Eagle coins reached 2,157,500 ounces sold in 21 days in February, which is 128.9% above the 942,500 ounces sold in February of 2018, although the Mint sold the 2019 supply in three weeks vs. all four weeks in 2018.

Putting both months together, American Silver Eagle sales so far in 2019 were 6,175,000 ounces, or 47.8% above the 4,177,500 American Silver Eagle coins sold during the same time frame in 2018.

Gold Rose to a 10-Month High

Gold rose to a 10-month high of $1,345 on February 20, but it fell to $1,319 at the end of February and then $1,312 on Friday, March 1.  Silver followed a similar pattern, reaching $16.03 on February 20 and then retreating to $15.81 on February 28, and $15.56 on Friday, March 1. Stocks have had a strong start to 2019, but if you go back just one more month, to November 30, silver and gold have beaten stocks.

There was no particular reason for gold to fall last Friday, but some traders feel that global tensions are fading. Although President Trump’s talks with North Korea fell through, a far more important and fruitful series of talks with Chinese officials has led some to assume that a trade war with China can be averted.

 

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