The silver market has experienced serious changes which precious metal investors need to be aware. Unfortunately, there is a shortage of information and data to provide investors with important key factors going forward. To understand the silver cost-price dynamics, investors need to see the following three charts below.
I did an interview with Jason Burack from Wall Street for Main Street a few days ago (to be published shortly) on the future value of precious metals. My analysis looks at how energy will be the driving force in pushing the value of gold and silver to substantially higher levels.
When I wrote the article Gold & Silver Prices To Surge On Fundamentals, Not Technical Analysis, many readers who made comments assumed the lower price of oil would guarantee lower precious metal prices for quite some time. While this sounds logical at face value, I believe the opposite is the case.
Before I get into why I believe the value of silver will surge in the future, let’s look at some silver price vs cost fundamentals.
The Price Of Silver vs The Price Of A Barrel Of Oil
The price of silver has moved in tandem with the price of a barrel of oil for nearly 100+ years. Here is a chart showing the change in the price of oil and silver since 2000:
As we can see in the chart, as the price of oil moved up higher, so did the price of silver. Some technical analysts may see this as merely a coincidence…. it’s not. Energy is the key factor that drives the value of most assets. This is not up for debate, even though many individuals will continue wasting their time trying to prove otherwise.
Now, the important thing to see in this first chart is the relationship between the silver price and oil price today versus what it was the last time oil traded at that level. To do that, we have to go all the way back until 2004 when a barrel of Brent Crude was trading the same as it is today.
The current price of Brent Crude is $39.65 and the price of silver is $14.11. However, when the price of Brent Crude was $38.26 in 2004, the price of silver was less than half at $6.67. This may give silver investors a lousy feeling as this past relationship portends for a much lower silver price.
Don’t worry, the fundamentals show that the present silver market structure is much different from it was just a decade ago.
Silver Mining Yields & Costs Head In Opposite Directions
Several of my readers have sent me emails worried that the lower price of oil will translate into much lower silver prices. While this sounds like common sense, there are several factors that reveal a much different picture.
One aspect of the…