Silver Bear Market Ends

Posted by Brittany Stepniak - Thursday, October 20th, 2011

Silver has outperformed all other precious metals this year, all while experiencing some wild volatility throughout: between losses of 2.8 percent and gains greater than 104 percent.

And, apparently, it's still got a lot of climbing to do...

Based on predictions regarding the future of developing economies and the seemingly never-ending European debt crisis, silver has a strong potential to rebound from a bear market. 

By the final quarter of 2012, silver will likely average around a record-breaking $42 per ounce – at least according Bloomberg's median value produced from a group of 11 surveyed analysts. 

When this happens, silver producers Fresnill Plc (FRES) and Pan American Silver Corp. (PAA) will achieve record-high profits.

This year alone, Pan American Silver will see $347.8 million in profits– more than double the $112.6 million the received in profit last year. Imagine what that exponential rate of profit-increase will look like when silver soars to record-highs...

From Bloomberg:

China, the biggest emerging-market user, is expanding at more than five times the speed of the U.S., driving consumption of the precious metal most used in industry. Demand is also coming from investors looking for an alternative to cash and gold, which costs about 50 times more than silver. The 30-week correlation coefficient between the two metals is now at 0.82, from as low as 0.47 in 2005, data compiled by Bloomberg show, with a figure of 1 meaning the two move in lockstep.

“Prices now look relatively cheap to where they have been recently,” said David Wilson, an analyst at Societe Generale SA in London and the most accurate silver forecaster tracked by Bloomberg in the two years through June. “The backdrop is still very supportive for gold and we think that silver will leverage off the back of that. Emerging markets are going to be important for demand for sure.”

Silver demand is here to stay.

Why?

Simple: it's extremely multi-functional and used for a variety of purposes; coveted for its aesthetic beauty as well as its practical endeavors. These two qualities alone make it a top-seller in jewelry stores as well as an important commodity in construction and energy sectors. As the use of solar panels is transforming and dominating the energy market – with silver as a primary component in panels and film – silver demand has no where to go but up.

On account of these combined factors, overall silver gains this year are hovering right around 34 percent. Gold isn't trailing far behind with gains right settling right at 24 percent. Platinum and palladium (amongst other metals) are the same fast-track to highest-ever annual averages.

Without any lasting solutions for the debt crisis, silver will continue to be of interest, especially to “newly industrialized countries.”