It is no secret that there has been a weakening demand for base metals in the Chinese Economy. Metal manufacturers are responding to this report by slashing outputs of copper, zinc and lead. The accidental side effect is a boost in silver prices.
About two-thirds of the world's silver output is a byproduct scrapped up when companies dig for base metals. Thus, when the Chinese demand leads to less output of base metals, less silver is unearthed and their prices get a boost. It is reported that production for the precious metals with fall this year for the first time in over a decade. As we continue to see mine cutbacks this will affect silver, giving the metal its long overdue attention.
Even just 3 months into the year we can already see the effects of this. After 3 years of losses, prices have already gained 15% in 2016 raising prices to about $16 an ounce. Silver, often known as “the devil's metal” gets its price volatile nature due in part to its store of wealth popular during times of crisis and part to industrial metal with demand linked to the economic cycle.
Lead and Zinc prices have been falling for many of the past years resulting in some of the biggest mining companies turning to survival mode. And as a result of this, mined supply of silver is down 9.2% this year, it is also predicted that 13% less will be mined in 2016 than 2015. As secondary silver producers, zinc, lead and copper, continue to see a big hit with lower prices, this could lead to a potentially significant boost in prices of silver moving forward.