Mineweb published an article that looks at whether the recent shortage in silver coins could mean that a silver price rally is in the cards. In particular, the article points to Capital Economics as being bullish on the silver price. The firm sees the metal reaching $20 per ounce by the end of 2016.
As quoted in the market news:
Although the research house is bullish on gold, commodities economist Simona Gambarini believes silver will outperform gold next year, partly as supply constraints – driven by producer cutbacks in response to low commodity prices – will start to weigh on the market.
According to Gambarini, silver mine supply will buck the trend of rising at 3.2% per annum to fall by 1% this year and 3% in 2016 due to capital expenditure cuts at primary and secondary silver mines. She adds that the outlook for silver supply (largely a by-product of industrial metals such as gold, copper and zinc) is closely tied to that of industrial metals and that the commodities rout could lead to a “substantial” decline in silver output.
Data from the Silver Institute shows silver mine production rose 5% to 877.5 million ounces (Moz) last year. However, Gambarini says cost-cutting measures implemented by Glencore and BHP Billiton, the fourth and fifth largest silver producers respectively, stands to reduce global silver production by at least 6.3Moz a year. Should other companies follow suit, “silver mine supply could start to dry up soon.”