The year of 2016 is turning out to be fantastic for both gold and silver. Silver prices have increased by up to 31.8% year to date (See why silver can protect your assets). This significant increase in price is something that simply cannot be ignored but you might be asking yourself why the price is increasing at all. In this article we will be breaking down exactly why silver prices are increasing and are geared to continue as the year progresses.
When identifying the reasons behind silvers increase in value, there are a few that stand out.
There are two trends that dig into where silver is heading. The first one is called the Golden Cross. The Golden Cross refers to tracking the price of silver by using moving averages. Imagine the 50-day moving average. When it surpasses the 200-day moving average this is known as the Golden Cross. When this event occurs, it is a fantastic sign for silver. This event recently happened with gold which means silver is not too far behind to follow suit.
The second trend is called the Gold-to-Silver Ratio. As you can probably imagine, this trend uses gold and silver as a relationship factor. The equation for this trend is simply the current price of gold, divided by the current price of silver. When this ratio is traded at extreme levels, it points to potential buying opportunities like it is now. For those that are interested in getting a piece of the pie, we recommend you take a look at our top 3 dealers which will help get you started.
Besides the relation that silver has with gold, there are other indicators that have an impact on which way the price of silver will end up going.
The first indicator is inflation. The prices of precious metals and silver are clearly affected by inflation by both a global and a domestic scale. To put it simply, if the value of the U.S. dollar is low, this is good news for silver. Many analysts are gearing up for the worst as the U.S. economy is crumbling from within. The market drop during the start of the new year is something you shouldn't take lightly.
When looking at silver, it typically has an inverse relationship with interest rate hikes. On a historical level, when interest rates are increased by the Fed, the price of silver will drop.
Investors looking for long-term investments that are reliable are turning away from the stock market and looking to other opportunities. One of these is silver and other precious metals such as gold. Silver has been out-performing the stock market this year and is not going unnoticed as investors are taking advantage of this trend. For those that are looking for a way to invest in silver without becoming an investor, there are other opportunities such as rolling your IRA over to an IRA with silver in it.
When comparing silver to other precious metals, it offers considerably more uses which will help keep the price increasing for the future. As the demand of silver increases while its supply stays limited, the result is an increase in value. Back in 2015 there was a shortage of silver by 4,040 tonnes while the year before, it was nearly half that amount. This is good news for silver investors as the price is deemed to increase as the years progress.
The demand for jewelry that contains silver has been increasing year over year and is projected to only increase. For example, the demand for silver bullion and bars was up by 24% in 2015 while the demand for jewelry was up by 1.1%. The U.S. Mint has dealt with its Silver American Eagles running out due to such a high demand.
For those that are looking to purchase silver without actually having to physically own it, there are various ways to approach this and one of them is an ETF. There are various silver ETFs which have been performing quite well this year and could be of interest to any serious investor.
Now is not the time to shrug off the potential of investing in silver. With so many different ways of doing it, there is little reason why you shouldn't dedicate a portion of your portfolio to precious metals.