By Melissa Pistilli-Exclusive to Silver Investing News

^[1]Silver has experienced some volatile price actions over the last few weeks and is looking more bullish than gold. Both precious metals are benefitting from what analysts and traders like Matt Zeman ^[2] of LaSalle Futures are calling "a general return to risk appetite."  A weaker dollar and a rebounding stock market is lessening investors' need to sell precious metals "to cover losses in other markets," said Zeman.

The silver price is holding well above its $10.50 support level, but facing strong resistance at $11.60. According to The Oil N'Gold Team ^[3], the outlook for silver "remains mixed with conflicting indicators." If silver falls back below $10.10 it will signal that a rebound from $8.40 is over and the price is retesting new lows. On the flipside, if silver breaks $11.77 we may see silver rally towards a $13.88 resistance level, said the team.

While the short-term forecast for silver remains mixed, the long-term prospects are looking much more promising. The same factors that are pushing down the price of silver and other commodities are also likely to drive prices up once world economies begin to rebound. Silver, like many commodities at today's prices, has plenty of room to rise.

Slowing Silver Production Good for Silver Price

In the current climate, metals mining and production is becoming less viable for those companies who find themselves strapped for cash. Many have curtailed production, halted development and canned exploration projects, along with employees, in an effort to reduce costs and stay afloat.

When GoldSilver.com's ^[4] Brent Harmes ^[5] took his family to Mexico for the holidays, he decided to take advantage of his proximity to one of the world's richest historical silver regions. Unfortunately, Harmes found that most of the area's mining companies weren't as enthusiastic about escorting writers around on tours of their projects.

Harmes saw firsthand how lower market prices for silver have really taken a toll on the region's miners. "The companies I contacted used to have robust operations in this region when they were going full bore, either exploring for silver deposits or actively mining it." But now, he realized, silver's low price has forced them to slowdown and in some cases cease operations. "One company," said Harmes, "had dismissed their exploration staff in October."

The slowdown in production and development of new mines (or in some cases redevelopment of old mines) is "just one of the factors why the supply growth of silver is being slowed to the market," noted Harmes. While the current situation looks grim, this all actually bodes well for the future price of silver.

Less product output equals less above-ground supply. Once the world economy starts to pick up and developing nations like China and India renew their thirst for resources, those commodities in short supply but under heavy demand will experience surging price rebounds. And this will likely be the case for silver, both a precious and an industrial metal.

Opportunity for Silver Investors

In the meantime, silver mining companies will need to continue tightening their belts. However, now represents a prime opportunity for precious metals investors to take advantage of silver's long term potential.

One of silver investing guru David Morgan's ten rules ^[6] for silver investing includes "boosting the buying power of your dollars with mining shares." After one has obtained a store of physical silver, Morgan advises investors to "leverage both [their] knowledge and [their] buying power by purchasing stocks of mining companies" because "these shares are highly responsive to changes in silver prices, frequently producing much higher percentage returns than the metal itself."  

The key is to focus on undervalued miners with proven properties, who are cash positive, and are headed up by an experienced management team. These are the companies most likely to greatly benefit from a market turnaround.

Endeavour Silver Corp.

Brent Harmes did manage to find a silver company still operating in the heart of Mexico's silver region and eager to show him around. Canadian miner Endeavour Silver Corp ^[7]. [TSX: EDR] has properties in the Mexican states of Durango and Guanajuato, and is exploring projects in Chihuahua and Michoacan.

Early last week Endeavour announced that the company experienced record annual silver production ^[8] for the fourth year in a row. The total silver production for 2008, 2.34 million ounces, was up 9% over last year. Fourth quarter production from the Guanacevi and Guanajuato silver mines was up 10% over the previous quarter and up 8% over the fourth quarter of 2007.

Next month, Endeavour intends on publishing a comprehensive review of its 2008 mining operations and production forecast for 2009. In March, the company plans to release its 2008 year-end financial results and 2009 financial outlook.

Endeavour's Chairman and CEO, Bradford Cooke has said that "management is of the belief that the silver price will rebound in 2009 so we plan to use this time of lower silver prices to accelerate the development of new ore-bodies that will facilitate our next phase of production growth."

Cooke remains optimistic that the silver price will rebound and when it does Endeavour intends to have its mine development projects on track. "We plan to resume our aggressive production growth so as to achieve our 5th consecutive year of record silver production."

On Friday of last week, shares of Endeavour jumped ^[9] more than 13 percent to $1.55 on the TSX with a volume of over 250,000 shares.  On Monday, shares ^[10] were hovering around $1.50, down from a 52-week high of $4.49.