Understand Why the Price of Silver Is About to Go Up !
If investing in precious metals is your ticket to getting rich, then buckle up! The price of silver is about to soar. Do you want to know why? If you are into gold and silver, and you are following the Silver Futures Market, you will notice that the gray metal is oversold. When the year opened, the open interest in silver futures was 150,000 contracts. (Open interest – is the number of futures contract that are still open or not yet delivered.)
On July 28, silver futures’ open interest increased to around 190,000, a 26.7% increase in less than seven months! Now, what happened to silver prices? They went down to more than six percent.
When open interest increases and prices decrease, this suggests that there’s a significant number of short-sellers of silver. Since there are so many of them, they need to cover their positions that would contribute to a big increase in silver prices. As the prices increase, more short-sellers will close as margin calls start coming.
Silver Spot Price vs. Silver Futures Price
Today, spot silver is trading at $14.79 per ounce. For silver futures, their due delivery in August is trading at $14.72, and the contracts for September are trading at $14.74. This is what you call a spot price that is lower than the futures price.
This is a great opportunity for an arbitrageur, like you. If you own a good volume of silver metal, you can sell it at the spot market and then buy futures contracts to buy back the metal you sold. By doing that, you will not only profit from it, but you would also get to save on storage costs during this period.
However, if the arbitrage opportunity is exploited, the effect will be the spot price decreasing and the near-term futures price increasing. If that happens, the time will come that there will be no more arbitrage opportunity left. The good thing is, we do not see that! The gray metal’s spot price remains higher than the near-term futures price because of counterparty risk.
Moreover, investors are not sure if they can buy back the metal they sold on the Futures Market. The reason they doubt if the sellers of futures contracts can deliver the metal is because the demand outweighs the supply. Demand is higher than supply.
Sold Out 2015 American Eagle Silver Bullion Coins
In June, the U.S. Mint declared that the popular 2015 American Eagle silver bullion coins were sold out because of high demand. Since the price of silver went down, the demand went up. Silver coins sales reached 4.84 million ounces. It is much higher than the amount of silver sold in May! In fact, it is even doubled. (Source: Reuters, last accessed July 29, 2015.)
Investors are not the only people buying the precious metal. Other industries are also buying this metal because silver can be used as an excellent electric conductor. As industries for solar energy and electronics grow, the demand for silver would also continue to grow.
These are the reasons why silver is being oversold and will continue to happen in the coming months.
If you want to know more about the U.S silver coins and how you can benefit from them, Capital Gold Group can provide you with the information you need.
Capital Gold Group Call 1(800)510-9594, or visit us online at startwithgold.com.
DOWNLOAD YOUR FREE DEFINITIVE GOLD GUIDE
The Definitive Gold Guide:
On January 8, 1835, President Andrew Jackson proclaimed that the last installment of our national debt had been paid, and that the United States was debt free! This was the only time in American history that the U.S. had no debt.
Get the Gold Guide free by filling out the form below and we will send you 7 more eBooks FREE, once a week via email.