Higher Silver Price in 2016 Supported by These Numbers

There are encouraging signs for the silver price in 2016...

Positive silver price action coupled with supportive news on the fundamental side are pointing to a possible end to the silver bear. Still, we'll need to see some key technical price targets met before we can declare an outright return to a full-fledged silver bull.

To figure out what might lie ahead, let's look at recent action and market news for silver prices...

Silver Price Retesting Lows Before 2016

As of Friday, silver had pretty much kept pace with gold for the week, except for some additional volatility.

Here's how last week's five trading days looked:

silver price

You can see that on Tuesday, Nov. 17, and Wednesday, Nov. 18, the silver price held up better than gold and bounced more as minutes from the Fed's October meeting were released.

That followed through on Thursday with a gap higher, but then fizzled toward the end of the day.

Then into Friday, the weakness continued, with both metals down.

So by the end of the last trading week, the silver price was actually down about 1%. Not a big deal, but also not in the right direction.

silver

As you can see from the above silver price chart, the metal is close to testing its August lows. With silver down over 8% so far this year, it's becoming a crucial time for the silver price.

We'll be watching carefully how it behaves at this juncture.

Meanwhile, if we look at the fundamentals of supply and demand in the silver market, they're certainly looking supportive.

Silver Price in 2016 Gets Supply/Demand Boost

After 12 consecutive years of higher mined silver output, it appears we're about to buck that trend...

At least, that's what industry consultant GFMS sees, forecasting a drop of 4% for 2015.

And GFMS also expects that this year will mark the third in a row where physical silver sees a deficit. In its Silver Interim Report, Thomson Reuters GFMS said that 2015 is likely to see a 42.7 million ounce deficit in physical silver.

The same report sees the overall silver supply dropping 1,014 million ounces this year, 3% lower than 2014. The report said, "This decline is expected to be driven by flat mine production, a 5% drop in scrap return, and net de-hedging of 12.6 Moz."

Since about 75% of mined silver is a byproduct of mining base metals or even gold, industry experts expect growing annual silver deficits.

With low base metals prices, there's less incentive to produce them, thereby lessening the output of silver byproduct.

On the demand side, things continue to look positive as well.

According to Platts research, Turkey has seen strong silver imports this year. At 256 metric tonnes (mt) through October, that level has already surpassed imports for all of 2014.

That's the highest on record for an entire year in that country, easily surpassing 2013's 227.8 mt and 2014's 227.4 mt.

Research house Metals Focus thinks we could see further downside in silver in the near term, but that prices are likely to rise in 2016. Metals Focus consultancy has said that the market's seen strong retail buying, possibly reaching 7,700 tonnes, but that's been balanced somewhat by professional investors being net sellers.

Metals Focus expects that, although concerns remain due to a slowing Chinese economy, that country is likely to manage a soft landing, which could spur industrial silver demand globally next year.

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So while the technical picture may be slightly bearish near term, the medium and longer term look strong on both price and fundamentals.

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