(Source: Seeking Alpha)
Last week, silver prices continued a painful slump in 2013, closing out a volatile week down $0.66, or 3.4% at $18.74. Gold prices, on the other hand, closed down $373.87 on the week, or 23.4%. The white metal, down roughly 35% year-to-date, has performed worse than gold, which is down about 20% in 2013. The serious slump in gold prices, tame inflation and record stock market rallies has taken some of the shine out of silver this year. And now we're getting more questions along these lines from Seeking Alpha contributors: Will the price of bullion go up in 2013?
Since silver is more volatile than gold, it has underperformed--typical of silver in a serious bear market. However, since volatility works both ways, when silver rises, we're going to see a massive spike in silver prices. This exact situation occurred in April 2011 when silver prices rose by 170% in the space of just seven months. This month, silver prices have slumped to deeper lows even after being smashed big time earlier in April when silver prices dropped by 12% in a single week. Technical indicators suggest an extremely oversold state and that a rise in metal prices seems imminent. Therefore, the question is not 'if' but rather 'when' prices will rise.
The Global Physical Demand And Supply Picture Points To An Unavoidable Rise In Bullion Prices
Most mints internationally have reported unusually high demand and volume orders of bullion, especially for silver bullion coins. In India, for example, where gold imports have dipped since the middle of May 2013, silver imports have seen sudden spurts since April 2013. In the past months, massive gold ETF outflows have been blamed by the mainstream media for the price onslaught in gold. What they are not recognizing is that most of this gold outflow has ended up in many eastern markets where individual buyers have hurried into the physical gold markets. What this means is that there really isn't a lack of demand for precious metals. According to the World Gold Council, and as I have indicated in my previous articles, it is quite likely that gold previously held in the ETFs will find its way to Asian consumers taking a long-term view on gold. Regardless of what's happening in the west and in the paper bullion markets, Asian buyers are making huge purchases on bargain bullion prices. We are currently in a market consisting of unprecedented waves of long-term, physical gold and silver demand from central banks and individuals alike-resulting almost exclusively from the recent steep declines in prices. In order to really drive my point across, let's bring up the supply picture of the market. As current spot prices continue to decline, many investors warn of miners going out of business (i.e. at $1000 spot prices, 50% of miners will become bankrupt), which leads to an inevitable decline in supply.