By Melissa Pistilli-Exclusive to Silver Investing News

Did you see silver drop as low as $9.35/oz today? And the Dow briefly fall below 8,000?  Some of you may be wondering, “As the markets plunge at a devastating pace, why is the price of a safe haven commodity like silver not soaring through the roof?”

I know there are those of you who will instantly shake your fist and declare price manipulation.  While I am not one to totally disagree, the answer is more complex than that since there are several other underlying causes.

The consumption of silver for industrial use is responsible for a little more than half of all silver demand. As is the case with all commodities tied to economic growth, such as all the base metals, investors have deep concerns that the current worldwide financial insecurities will further slow already declining economic growth, which is just beginning to depress demand for industrial commodities across the globe. Many freaked out investors and institutions are looking to get out of everything, including silver.

It is said that fear and greed move markets. It is at times like this that such a proverb proves to be true. “Expect the silver price to keep lagging as fear of systemic financial crisis drives market psychology,” says Franklin Sanders of The Moneychanger.

While most silver buffs are confident that silver’s overall long-term outlook is strong, for the short term I would say the paper market for silver is much too volatile to trust and will remain susceptible to profit-taking. For those steely investors who don’t grow squeamish watching silver’s ups and downs and have the resolve to ride out this latest crisis, now’s the time to take advantage of silver’s low prices on the paper market. Prominent analyst and trader Roger Weigand has this week forecast new rallies for gold and silver in January, February, and March.

Physical market

Fear is motivating investors in the silver paper market to pull out, yet, that same insecurity has been moving investors in the physical markets to buy up silver bullion and coins at unprecedented levels in recent months.  The intense demand for silver has resulted in production and delivery delays.

This week, the U.S. Mint announced that in an effort to meet the increased demand for gold and silver coins, it would be halting the production of certain bullion products in order to allocate material for one ounce Gold and Silver American Eagle coins. The U.S. Mint itself acknowledged “gold and silver demand is unprecedented.”  Currently, sales of Silver Eagle coins are higher than at any other time in history.

Silver junior mining stocks

In an interview with The Gold Report this week, Trader Tracks Editor Roger Weigand discussed the latest market woes of junior miners and what the future holds for them. “One of the biggest problems hitting a lot of juniors today is the inability to raise cash,” said Weigand. “Those that have cash, are operating new mines, or hold reserves in locations near senior miners can probably be acquired.”

Another problem faced by miners, juniors and seniors alike, is inflation, he adds. “Any miners operating costs are extremely high relative to where they were only one to three years ago.”  Weigand believes inflation will continue to drive up mining costs, but he also believes the price of gold and silver are destined to rise.

For those looking to take advantage of low-priced junior stocks, Weigand advises investors “to be very picky. The key things to look for right now are potential cash flow, available cash in the till, and projected operating costs per ounce along with proven and inferred reserves.” Those juniors with proven resources and properties adjacent to producing majors are primed for takeover as long as they have enough cash to hang on to their projects until the major buys them out.

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