Silver is down 7.1% this year. Will this weakness persist? To find out, let's look at the key factors in the silver market this year.
The first two factors helped push silver 19.9% lower last year. That's more than gold or any other precious metal fell. Despite this, silver production rose 5% in 2014. That added to the pressure on prices.
Why did miners produce more silver when prices were falling? Because of:
That's the backdrop. Now let's look at this year's fundamentals.
Supply
Silver mine output has risen for 12 consecutive years (silver mine supply is a little different, due to hedging, but also trending upward). This year could break this trend. Industry experts at GFMS forecast up to a 4% decline in silver output in 2015.
Why? It's not rocket science. There are now fewer major new mines under construction due to lower metals prices.
That leaves scrap supply. But scrap comes from jewelry, and sellers are price sensitive. People like to sell granny's silver tea set when prices are up. We expect subdued scrap supply until silver heads much higher.
