GoldCore: India’s gold imports were over a staggering 150 tonnes in November and have seen a “phenomenal” rise in India, according to India’s Trade Secretary, Rajeev Kher.
A few weeks ago we said that the death of the Indian gold market was greatly exaggerated. The latest gold import data out of India confirms this.
The import restrictions on gold that were imposed on Indians in August of 2013 were lifted at the end of last month. Despite the fact that the restrictions were still in place gold importation in November surged an incredible 571% relative to the same month last year at over 151.58 tonnes
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.
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.
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.)
Silver Eagle Sales Break Annual Record
Silver Eagle sales in Y 2014 have already broken the Y 2013 annual record with a few weeks of sales still to be counted. As of 11 December, the US Mint reported that 43.1-M Silver Eagles have been sold so far in Y 2014. This compares to the 42.7-M during Y 2013, which was the prior all-time record.
Investor demand for Silver is strong and people are taking advantage of discount prices. It is not often that consumers can purchase an end product for less than the cost to produce it.
Many miners are unprofitable at current Silver prices as their all-in cost of production is closer to 20 oz.
Silver is undervalued in here as seen GSR (Gold/Silver Ratio. The GSR has risen to the highest levels since the Y 2008 financial crisis and 3rd-highest levels since the start of the Bull Market in Y 2001.
Silver bugs can now buy 2X as many Silver Eagles with 1 oz of Gold that they could in late Y 2008
The historic GSR is closer to 16 and the production ratio is also closer to 16. Since its inception in Y 1986, the US Mint sold 401.4-M Silver Eagles and 20.6-M oz of Gold Eagles.
This is an overall ratio of 19 to 1.
The natural ratio of the precious metals in the ground is 9 oz of Silver to every 1 oz of Gold. So, while one might expect the price ratio to be somewhere in the 10 to 20 range, it is currently above 70.
Over time, the ratio should trend downwards as all of the Gold ever mined is still in existence and most of the Silver gets used up in industrial applications and is not economically recoverable.
Some analysts believe these supply and demand fundamentals will eventually lead to Silver prices being close to parity with Gold.
Silver selling at 1/72 the price of Gold is an anomaly.
Using a ratio of 20-to-1, the price of Silver would need to climb to 60 at the current Gold price. And even at a ratio of 30-to-1, Silver would need to revalue to 40 going up by about 2.5X
- India imported a stunning 1,243 tonnes of silver in October.
- Surging gold imports have the Indian government focused on restricting gold demand.
- Evidence is mounting that prior restrictions on gold have tilted some investment toward silver and more gold restrictions are on tap.
The import restrictions on gold that were imposed on Indians in August of 2013 were lifted at the end of last month. Despite the fact that the restrictions were still in place gold importation in November surged an incredible 571% relative to the same month last year at over 151.58 tonnes.
This was an increase of 38% from 109.55 tonnes a month earlier, trade ministry data showed on Tuesday.
WATCH SILVER BOUNCE!!!
"They went after all the stops!
The people with stops here are just giving their money away!
That is why you buy real silver!"
makes sense to me!
"Well. Who caused this decline?
The banks, by capping 16.5 and capping gold.
Who is selling?
Buyers capitulating and tech funds who is getting herded to go short.
Who is buying if normal buyers are capitulating and tech funds are going short?
Who is left?
The banks. They are covering into the capitulators and the tech funds.
Process of elimination. Overseas, both metals were popping too"
makes sense to me..thank you!