Precious Metals Just Aren’t Expensive Enough

When it comes to silver streaming, no one comes within sniffing distance of Silver Wheaton (TSX: SLW,NYSE:SLW). Despite the idea behind the business seeming sound, the market simply hasn’t allowed it to flourish with silver and gold prices remaining so low. Based on remarks during the conference call, however, management appears to believe that prices are set to rise over the medium- to long-term due to pressures being placed on high-cost producers. Because of this, supply could be constrained to the point of affecting the supply-demand balance leading to price escalations.

Recently, Silver Wheaton has begun to diversify into gold streaming which hasn’t fared much better than its silver business. When examining this market, $1,200 to $1,300 per ounce appears to be the floor that many of the major miners are basing capital project and impairment decisions on. We have been climbing away from this range, so if it continues, look for some of Silver Wheaton’s partners to begin shipping more gold the company’s way.

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Fool contributors  Joel South and Taylor Muckerman do not own shares in any companies mentioned at this time.  The Motley Fool doesn’t own shares in any of the companies mentioned.