Silver Buyers "Not Investing, But Stacking"

Silver investing analyst "gets why people are buying", forecasts record-high prices...

 

SILVER INVESTMENT demand has receded since 2011, according to a detailed new report, but it remains "the single most important driver of prices" and is set to return, perhaps with force, over the coming decade.

 

On "current trends", says the new Silver Investment Demand report from US consultancy the CPM Group – commissioned by the Washington-based Silver Institute –  investors worldwide could grow their aggregate holdings by 50% between now and 2024.

 

This level of investing "would be expected to push annual average silver prices to a fresh record high further out," says CPM Group's managing director, Jeffrey Christian.

 

Relaying an overview of silver's historical use as reliable money, notably in China for 400 hundred years to the mid-20th century – as well as across the United States before the 1913 foundation of the Federal Reserve – Christian recounts a modern silver investor's comment to him regarding what many chatrooms call "stacking".

 

"With due respect," the investor said, "you need to know that we do not invest in silver. We stack it."

 

What the comment means, says Christian, is that silver investors in the developed West – whose demand has surprised analysts and defied the metal's 60% price-drop since 2011 – "[do] not see silver as an investment, but as a store of wealth, an alternative to holding one’s wealth in a nationally issued currency such as the US Dollar."

 

Instead of viewing silver as a speculative or short-term investment, Christian goes on, these buyers see the metal "as a core part of their long-term assets, the base in some cases of the individual's wealth...much more meaningful and visceral to the owners than shares in a stock or a series of bonds they may hold for a period of time."

 

Weighing against the silver stackers, however, other more "short-term" investors have driven the metal's sharp price falls since it hit near-all time highs in spring 2011, CPM Group's Silver Investment Demand report explains.

 

So-called "trend followers", as well as "opportunistic" traders switching into equities, have added to sales from disappointed investors who had "over-blown expectations" that the bull market of 2006-2011 would continue. And because net investing demand shows what CPM Group calls "a strong 59.1% correlation" with real silver prices (after accounting for inflation), this sell-off by shorter-term money drove the crash.

 

Ultimately, the report for The Silver Institute concludes, future net investment demand "can only be guessed [and] will depend on how investors view the world around them." But investors "may begin to increase their net silver purchases in the years ahead." Because with Western economies failing to redress their financial imbalances since the 2007-2012 crisis, the concerns over inflation and credit-default which "motivated" the surge in demand from 2006-2011 could soon return.