*Note: For significant supplementary information on “Silver’s Amazing Fundamentals” go HERE – Ed Money Talks 

Silver Prices to Outperform Gold in 2015

I know it’s a bold prediction: silver prices are going to surprise investors and provide them with better returns than gold bullion. I say this because both the fundamental and the technical pictures for silver continue to improve.

Demand and Supply

The supply of silver produced continues to dwindle, while demand for the metal is robust. This is the perfect recipe for higher prices.

In Canada, a major gold-producing country, in the first nine months of 2014, mines produced 373,828 kilograms of silver. In the first nine months of 2013, Canadian miners produced 510,390 kilograms of silver—representing a 26% decline in silver mine production. (Source: Natural Resources Canada web site, last accessed December 9, 2014.)

Mine production in other silver-producing countries is also on the decline. As silver prices remain low, silver producers have less incentive to produce. And those whose production costs were too high have shut down their operations.

Meanwhile, the demand side for silver remains strong. From January 1 of this year to December 9, the U.S. Mint has sold 42.86 million ounces of silver in American Eagle coins. In the entire year of 2013, the Mint sold 42.67 million ounces in similar coins. (Source: United States Mint web site, last accessed December 9, 2014.) Because of the holidays, December is usually a robust month for silver coin sales; hence, the number of American Eagle coins sold this year will only increase.

Demand for silver from India is strong, too. Ashish Mundhra, managing director of Mundhra Bullion, a precious metal dealer in India, said, “There is a tsunami in silver. Investors are pouring in.” (Source: “Silver Demand Returning, in Patches,”The Wall Street Journal, November 11, 2014.)

The Technical Perspective

When I look at the long-term chart of silver prices, it keeps me optimistic.

Look at the chart below. It shows how the bull market in silver that began in 2002 continues to find support (red circles). The price of silver has certainly come down from its peak in 2011, but remains well above the lows it made in 2009.

Larger Image

Below the silver price chart above, I have also plotted the gold-silver ratio. This ratio is simply how many ounces of silver it takes to buy an ounce of gold. It currently sits at 73.51. Looking at it from a historical perspective, since 1970, the average gold-silver ratio has been 55.4.

If we assume the gold-silver ratio will come back to its historical average, either gold prices need to collapse or silver prices will have to increase to at least $22.00 an ounce—34% higher than where they sit today. If the price of gold bullion continues to rise, as it has been since October of this year, then silver prices will need to move higher than $22.00 an ounce, as it regresses back to its historical gold-silver ratio.

Don’t worry about the daily fluctuation in silver prices. The markets are ruled by short-term emotions and irrationality—two conditions that present long-term investors with opportunity to purchase quality senior silver producers at cheap prices.

This article Silver Prices to Outperform Gold in 2015 was originally published at Profit Confidential

To say that gold is in a bear market is to misunderstand both gold and markets. Gold isn’t an investment that goes up and down. It is money in the most basic store-of-value sense. Most of the time it just sits there, and when its price changes in local currency terms that says more about the local currency than about gold.

But when currencies collapse, gold shines. 

Consider the above from the point of view of a typical Russian. The ruble is tanking (no need to understand why — all fiat currencies go this way eventually and the proximate cause is almost irrelevant). Russians who trusted their government and kept their savings in, say, a bank account, are losing their shirts. But those who own boring, doesn’t-pay-interest, in-a-bear-market gold have seen their capital appreciate in local currency terms by about 60 percent in just the past month. They’re not “making money,” but they are preserving wealth.

This is how it has gone always and everywhere when governments have destroyed their currencies. In the Roman Empire, revolutionary France, revolutionary America, most of Latin America in the 20th century, and now big parts of the developing world, local currencies evaporate but gold just sits there, buying the same amount of stuff as ever, impervious to the games governments play.

It won’t be long before this chart is replicated in a whole lot of other places. But by then it will be too late to prepare. The gold will be gone and those who trusted their governments will have to make do with promises.

If we lived in a normal word of fiscal propriety, the falling oil price would be viewed as something to celebrate, as it reduces costs across the board, and should theoretically boost the economy, but we live in an abnormal debt-wracked world where instead fears are surfacing that the plunging oil price will trigger a series of cascading loan defaults that have the potential to collapse the system – already world stockmarkets are buckling. If things really start to unravel it should provide the perfect excuse to bring in global coordinated QE, which we have been moving towards over the past few years, albeit on an ad hoc basis, whose underlying purpose will be to maintain interest rates at zero to stop the system collapsing, and to push the bill for the mess onto the little guy, whose standard of living will be progressively eroded by QE engendered inflation. At what point will they ride to the rescue with their global QE program? – that is a matter of conjecture, but we can presume that they will wait until things get sufficiently bad that people are starting to clamor for it so that it becomes politically acceptable and they can get away with it. 

Coordinated global QE should be good for the gold price in all major currencies, for the simple reason that money will be losing value steadily so that gold, which is real money, must advance to compensate for this. Looked at from this point of view it is remarkable that gold has corrected as far as it has over the past several years.

Right now gold appears to be in a base building process as its rate of decline has slowed as we arrive at what is believed to be the end of its long corrective phase from its 2011 peak. On its 15-year chart we can see that there was very little follow through after it broke down from its long-term uptrend and beneath the support at last year’s lows – one would have expected it to drop quite quickly back to the next important support level in the $100 area – instead it hopped back above the failed support. This lack of follow through is regarded as a positive sign, especially as the dollar has remained resilient in the recent past.

…..continue reading for more analysis & 12 more charts HERE