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Why silver could be worth a buy

by , 26 March 2015

There are a number of reasons why buying silver makes sense. It has strong fundamentals supporting this.

On the other hand, there are also reasons why the worst may not be over for silver.

Let's take a closer look at what's going on and why it could be time to buy the precious metal…


The fundamentals supports silver


The uses for silver are growing. The precious metal has applications in technology and medicine.

And because such a small amount of silver is needed in these applications, even if the price rises, users will continue to use it. It’s an essential and unique metal.

The demand for silver jewellery is also on the rise. This is thanks to the growing middle classes in China.

And on the supply side, silver miners are struggling to mine what they have, never mind find new sources.

These fundamentals point to a potential shortage of silver, Dominic Frisby in Money Morning UK explains.


The case against silver


Some market participants believe that the number of investors still in silver is too high.

Looking at exchange traded funds for silver, ownership is high. It’s around 5% off all-time highs. A bull market doesn’t usually appear when this is the case, it comes when they’re under-owned.

The strong dollar isn’t good for silver either, nor any other dollar-denominated commodities.

Silver has been in a bear market since April 2011. It’s now trading around $17 an ounce. It hit $8 during the financial crisis.

The chart below shows the silver price over the past five years…


Chart of silver price


Why buy silver?


On the charts, silver is looking like a buy, based on price action alone.

This could be the start of new bull market for silver.

Silver has performed okay in comparison to gold this year. And looking at the gold-silver ratio, this has levelled off after rising, another positive for silver.

If you think there’s a case for silver based on its strong fundamentals, you could buy into the precious metal too. Just remember, stick to investing a small amount, say 1% of your trading account.

So there you have it, why silver could be worth a buy.

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Why silver could be worth a buy
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