Investment Demand Will Determine A Continued Rise in Silver Prices

April 27, 2011

Silver prices doubled since last summer, and the increase could continue through 2015, says Andrew Kaip, a director and analyst at BMO Capital Markets Corp. The sustained price of silver is dependent on three factors: short mine supply, strong industrial demand and continued investment demand.

“Can that mine supply deficit take place longer term, and can we see it extending into 2013 to 2015 despite this fact that we’re seeing pretty substantial mine growth? And the answer is yes,” Kaip said. “So long as we see sustained investment demand over the longer term, the supply/demand fundamentals for silver will remain strong, and that will provide support to the silver price.”

Kaip points to Silver Wheaton (SLW) as his favorite senior silver mining company. Kaip says a senior company like SLW has less execution risk than a junior mining enterprise, because a capital-cost overrun or a delay would have less of an effect on operations.

Silver Wheaton is a royalty stream company,” Kaip said. “It’s showing very good growth. It’s a very good business model, and it provides investors really a much lower-risk way to acquire exposure into silver equities. So it is a preferred name in that regard.”