Silver has now dropped to $19 and is down 3.1% for the year. Unfortunately, the pain is probably not over for silver bulls due to the fact that June is historically the worst month of the year for silver.
The above comments are edited excerpts from an article* by Prudent Finances as posted on SeekingAlpha.com under the title June Is Historically The Worst Month Of The Year For Silver (SLV).
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The articles goes on to say in further edited excerpts:
In the last 20 years, [as can be seen in the table below,] spot silver has dropped in 14 of those years in the month of June, and it has fallen by more than 10% three times…If it were to drop another 10% this year, it would take the price to a shade below $17. I’m not predicting that, but the $17 level could be seen as a worst-case scenario.
The Good News
…Is there any good news for silver bulls? In short, the answer is yes.
- silver is experiencing record demand…increasing by 13%…in 2013. Here is a link to a chart produced by The Silver Institute that details total supply and demand for the last ten years,
- silver is below the total production costs of primary silver miners. Primary silver mines supply about 30% of the world’s mine supply, while the remaining 70% of silver is produced as a by-product of other metals. With silver below its production cost, at least 30% of the world’s supply could be in jeopardy if primary silver mines get suspended due to non-profitability. Is $19 silver low enough to convince the management of primary silver mine operators…to suspend operations? Probably not, but a drop to the $17 worst-case scenario could be a different story.
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Physical Silver vs. Silver Miners
I continue to believe that if you have a long-term horizon and if you are unleveraged that you should not fear a drop to the $17 level because, in the long term, a silver price in the teens is not sustainable if you consider the global supply and demand situation. There is safety in silver in the long term.[While there is safety in physical silver in the long term but] the same, however, cannot be said for the silver producers. While silver will always retain some sort of value…silver producers can drop all the way to zero…
Time works against investors in silver miners, but it doesn’t for… investors in physical silver coins/bars investor. Yes, there are optional insurance fees for coin and bar holders, but those costs are small and won’t destroy your investment. However, if you are invested in silver producers, you could be right about the upward directional movement of silver, but still lose money if it takes too long to happen.
*http://seekingalpha.com/article/2248073-june-is-historically-the-worst-month-of-the-year-for-silver?ifp=0 (© 2014 Seeking Alpha )
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