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Silver price forecast: $10 an ounce in 2015?

Silver price forecasts

Despite recent weakness, gold has been one of the best performing commodities this year. Under normal circumstances, silver would be performing even better. Call 2014 an anomaly then.

While gold is up 8 percent for the year, silver has been flat. Half of the white metal’s demand comes from investment vehicles. The other half comes from industrial uses. As the economy improves, that should drive up industrial consumption of silver. At the same time, the Fed’s ongoing quantitative easing programs mean we should continue to see investment demand for silver. Shouldn’t gold and silver prices be headed higher?

Peter Schiff, the president of Euro Pacific Capital, thinks so. He told CNBC that he believes gold could reach $5000 per ounce.

“I’ve been buying gold for over 1213 years. I’ve been recommending it for my clients. Not once have I bought gold because of geopolitical risks. I’ve never even considered that. The people who say that are the people who don’t buy any gold. I’ve been buying gold for the last decade, and it’s because central banks are creating too much money. There’s too much inflation. Interest rates are too low. And so I want to store my purchasing power in something central banks can’t print. I think we’re headed much much higher because they’re not going to stop those presses. I don’t know the time period. They’re just going to trend higher. I’ve said $5000, they’ll go higher than that.”

If that were to happen, the increase in investment demand for silver could drive prices up rapidly. Silver has been showing signs of strength in the stock market, too.

“Silver saw the largest inflows [amongst commodity ETFs] during the quarter,” says the Wall Street Journal (per BullionVault), “as investors looked to the metal as a leveraged play on improved sentiment towards gold.”

Not everyone is bullish on silver, though. Natixis analysts are calling for a base case of silver at $18.60 an ounce this year, and $15 an ounce next year (per Mineweb). They could even see the white metal falling as low as $10 an ounce in 2015.

“At 19,700 tonnes, the amount of silver held in physically-backed ETPs (exchange traded products) is equivalent to almost 80% of 2012’s mined output. If last year’s mass exit from gold ETPs was followed this year by sales from silver ETPs, this could rapidly turn into a substantial new source of supply just as happened with gold last year. Under these scenarios we could see silver prices fall to an average of $15/oz in 2014 and $10/oz in 2015.”

The only solace I get out of such bearishness is it can’t get much worse. The contrarian in me wants to buy more silver when the bears take control.

I don’t think we’re out of the woods for silver prices yet, though, so I’ll bide my time. Inflation will begin to rear it’s ugly head soon. That’s why I’ll start buying more silver. For now, my favorite investment for 2014 remains bitcoin. Check out my bitcoin price prediction page on crypt.la to learn why.

Silver price forecast: Silver should be at $87 an ounce

Any silver price forecast is dependent upon the expected behavior of the U.S. dollar. If you believe that dollar is on the verge of devaluation, you can probably expect silver prices to climb in response. Hubert Moolman’s recent piece “Monetary Collapse and Silver Price Not So Orderly Rise” at The Market Oracle, compares today’s volatile gold and silver market with the equally volatile precious metals surge in the late 1970s and early 1980s. Moolman does that by looking at patterns in the gold-silver ratio (the number of ounces of silver it takes to buy an ounce of gold).

Moolman points out that the gold-silver ratio has been trending down since roughly 1990, and that the pattern indicates we could see a gold-silver ratio around 15 in the months or years to come. Here’s his chart, which shows the gold-silver ratio over time (source):

Silver Price Forecast Chart

If the gold-silver ratio were at 15 today, we’d have silver prices at $87 an ounce. That sounds high, but keep in mind that if silver were to spike rapidly, gold would probably be climbing higher, too. That would compound the price gains for silver if we truly moved to a gold-silver ratio of 15. That would also make Moolman’s silver price forecast even higher.

Moolman’s basic thesis is that we’re on the verge of an all-out monetary collapse.

“The rise of silver and the collapse of the monetary system is inescapably linked,” Moolman writes. “Therefore, if the collapse of the monetary system is not orderly, then the rise of silver’s value will not likely be orderly. Collapse by definition suggests: to break or fall suddenly. This would suggest that when the time comes, silver will explode higher suddenly; for example, it could be possible that it rises $10, $20, $100 a day, until you can suddenly not buy it with fiat money.”

My silver price forecast

If the dollar truly were to collapse, it’s hard to argue with Moolman’s silver price forecast. Investors, consumers, institutions and governments would be clamoring to move their fiat currencies into hard assets like real estate, gold, silver and possibly even bitcoin or stocks (check out my post Bitcoin inflation hedge: The new gold and silver).

I’m not as pessimistic as him in the near-term, though. While I do expect inflation sometime in the not-so-distant future, I don’t see signs that it’s imminent. Prices can’t move higher if people aren’t spending much money (put another way, inflation require consumers to be going on shopping sprees). Economists measure the amount of money moving through the system as money velocity. Right now, money velocity is low (source):

Silver Price Forecast: Money Velocity

Until money velocity picks up, inflation will remain low, and the government’s free to print as much cashola as they want. Eventually, it’ll catch up with them, but I believes the scars from 2008 are too fresh to expect consumers to start overspending any time soon. That gives the Federal Reserve a nice grace period to continue printing money.

So long as we have low inflation, silver prices will remain low. My silver price forecast is $25 an ounce in 2014, though I expect it to go much higher in 2015 and beyond.

Why are search queries trending down?

I was drinking coffee and reading Investor’s Business Daily over the weekend, when I came across some interesting graphics. The paper reports that “U.S. search queries fell 10 percent in February from January. That’s the biggest one-month decline in the last six months.”

The number of search queries were down across the board: at Google, Yahoo and Ask.com. Here’s one of their charts showing the overall trend in search queries across all the major search engines:

google-search-trends

The total number of search queries in the U.S. spiked in January, but has otherwise been trending down since October (when there were approx. 19.25 billion searches). February saw 17.75 billion searches.

What IBD didn’t address is why there’s a downtrend in the search queries. Have we reached the search saturation point? My speculation? People are spending more time browsing on smartphones and tablets. There, apps rule, and the web experience is more passive – driven by content discovery rather than proactive web searches. I’d be interested to hear your opinions on why search queries are declining, though! Please use the comments section below.

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3 reasons silver prices could head higher in near-term

1) Gold-silver divergence. Since the start of the year, the price of gold is up more than 5 percent while the price of silver is off 1 percent. Typically, the white metal outperforms gold during uptrends, and it underperforms gold during downtrends. This year, silver just hasn’t kept pace with gold. In fact, the gold-silver ratio is hovering around 65, a level we haven’t seen since last summer. Admittedly, gold supplies are currently under pressure, but the gold-silver ratio tends to revert to its mean in the low 50s over time. If the gold-silver ratio were at 55 today, we’d be looking at silver prices around $23.50 an ounce.

2) The bear market to beat all bear markets. Jordan Roy-Byrne at SilverSeek points out just how bad silver’s bear market has been since 2011. In fact, it’s the second-worst bear market for silver in history (the first being the bear market from 1980-1982 when the precious metals bubble burst). “Our technical work suggests that we should watch for a final low and end to the bear market in the coming months,” Roy-Byrne writes.

3) Contraianism. If you buy the argument that we’re in a decades-long bull market for precious metals, then you’ve got to look at silver’s current setback as a blip in a longer-term uptrend. In 2011, analysts were bullish on silver. Had you followed their advice and plowed into silver that year, you’d be down more than 50 percent. Contrarians do the opposite of what the broader market does: they buy when everyone else is selling and sell when everyone else is buying. It takes tenacity to stick to your convictions, but if your investing timeline is long, the spring months could be the perfect opportunity to begin re-building a position in silver.

Note: Always remember ‘opportunity costs.’ If you tie your money up in one investment, you’re unable to invest in something else. In my mind, digital currencies present a more appealing investment opportunity than precious metals. Check out my post Bitcoin inflation hedge: The new gold and silver to see why.

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Amazon (AMZN) stock price targets

Analysts are very bullish on Amazon’s (AMZN) prospects for growth. A poll of 36 analysts at Yahoo shows that the average earnings estimate for the company stands at $1.92 in 2014. That would be an increase of 225 percent over 2013′s $0.59 per share! What’s even more amazing is the fact that analysts believe Amazon could more than double its earnings again and bring in $4.23 per share in 2015. One analyst actually expects the company to have earnings of $9 a share in 2015!

Overall, analysts expect the company to grow at 49 percent per year over the next 5 years. It’s hard to believe that an online book seller has morphed itself into one of the world’s most formidable online retailers, content providers and internet services companies (thanks to its cloud hosting business).

Analysts are bullish on Amazon’s growth for several reasons:

  • Rapid growth in the company’s cloud-hosting business.
  • A 25 percent price increase for Amazon Prime (from $79 to $99 a year)
  • Strong tablet sales (with Amazon capturing 24 percent of recent tablet orders)
  • Increasing use of Amazon video streaming as the company announced plans to make more content free for all users (a brilliant marketing move that should entice users to buy more premium streaming content) (Amazon has since denied reports by the Wall Street Journal that the company would start offering a free, ad-supported streaming network)

Last week, UBS listed Amazon at the top of its list of “oversold tech stocks” (per 24/7 Wall Street). That’s hard to believe when the stock’s already trading at P/E of 578. Thomson First Call lists a price target of $433.45 for the stock. That would be a 31 percent increase over the current share price of $338. Thomson’s highest price target for the stock (per Yahoo) is $500. The lowest? $330.

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3 signs Amazon’s (AMZN) stock is oversold

1) Innovations aren’t priced in. Analysts expect Amazon (AMZN) to announce a “streaming device” at an event in New York City this week (per GainingGreen). Little is known about the device, but I suspect it will compete with Google’s Chromecast and Roku’s new Streaming Stick. That means it will probably be a small HDMI dongle users can plug into their TV’s HDMI ports. From there, users can access free and premium web-based content on their TVs via a remote control or a web page.

2) The experts call it a buy. Last week, UBS put Amazon at the top of its list of the most oversold tech stocks (per 24/7 Wall Street). Others on the list include CA Technologies (CA), Google (GOOG), Infosys (INFY) and Salesforce.com (CRM).

3) Tablet anyone? The Kindle family doesn’t necessarily pop to mind when someone says the word “tablet,” but Amazon’s tablets are actually capturing 24 percent of tablet market share. That’s probably because you just can’t beat Amazon’s prices. A brand new Kindle Fire HDX costs just $199 and has specs that are on par or nearly on par with leading tablets from Apple (AAPL), Microsoft (MSFT) and Samsung.

34% of U.S. consumers said they’re unsure if they’d purchase a tablet in the coming year. Of those, “47% stated high prices to be the reason for their uncertainty,” per TabletPCReview. The average price for a tablet is $326. That makes the Kindle Fire HDX look particularly attractive as its nearly 40 percent cheaper than the average tablet. New and existing Kindle owners are a cash cow for Amazon as they purchase a steady stream of online content from the company in the form of ebooks, movies and TV shows.

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Five factors propelling silver prices higher in 2014

I recently presented the bearish case for silver prices. I’d be remiss if I didn’t take a look at the bullish side. Here are five core factors motivating silver investors in 2014:

1) Tepid growth. Q4 economic growth in the U.S. was markedly weaker than analysts expected with the economy growing just 2.6 percent. Slow growth during the busiest shopping months of the year doesn’t bode well – particularly since Q3 was so strong (with 4.1 percent growth). Slow growth means continued easy monetary policies from the Fed.

2) The Fed is posturing. Janet Yellen and co. have hinted that they may hike interest rates sooner than we thought, but no rational investor or market analyst believes that. The economy is simply too fragile to start raising rates in six months. With interest rates near zero, banks continue to slosh cash into the economy.

3) China slowdown. China’s aiming for GDP growth of 7.5 percent in 2014. That’s ambitious after what’s roundly viewed as a very weak Q1 for the Middle Kingdom. If it doesn’t look like they’re going to meet that target, though, expect the Chinese government to step in and aggressively ensure that growth continues. “We have gathered experience from successfully battling the economic downturn last year and we have policies in store to counter economic volatility for this year,” China’s Premier Li Keqiang said in a speech this week (per Reuters). “We will launch relevant and forceful measures.” QE out of China would likely mean higher inflation and higher silver prices.

4) Geopolitics. Russia seems to be speaking out of both sides of its mouth. Leaders there say they just wanted Crimea, but reports of a troop build-up on the country’s border with Ukraine persist. Should Russia invade its neighbor, the effects would destabilize the global economy and likely generate powerful safe-haven buying in the precious metals sector.

5) Base metals price decline. A slowdown in the emerging markets would translate into decreased demand for base metals. As prices fall, many base metal miners are forced to take lower-margin mines offline. What’s that got to do with silver? Two-thirds of all the silver mined around the world comes from base metal mining (per Nasdaq). Less base metal mining disproportionately impacts the world’s silver supply.

All five arguments sound convincing enough, but until we see inflation seriously start ticking up in the U.S., I’m laying my chips elsewhere, particularly on digital currencies. Check out my post Bitcoin inflation hedge: The new gold and silver to learn why.

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Look for gold prices to average $1,225 in 2014

British banking giant Standard Chartered just lowered its gold price forecast by 8 percent according to Metal.com. They’re looking for the yellow metal to average $1,225 this year. That’s nearly 5 percent off the current price ($1,278 at the time of this writing).

Gold prices have been volatile this year rising from $1,220 to $1,340 in an almost vertical climb that started with the new year. That was good for a 10 percent gain. Since then, gold’s given half of those gains back. If Standard Chartered is right, the price is going to keep falling.

SC joins a chorus of big banks that are arguing against the yellow metal. Goldman Sachs (GS) recently reiterated its year-end price target for gold of $1,050. That would be a drop of nearly 20 percent from today’s prices.

I don’t think the price decline will be that steep, but I can’t join in with the gold bulls. I find it interesting that silver and gold prices have continued to trend down despite the ongoing crisis in Ukraine. If that can’t generate some ongoing safe-haven buying, we’d need an all-out war to drive up gold prices and that’s something no one wants to see.

Goldman actually says they see gold prices heading lower for the next two years. It’s hard to argue with them when the metal’s hovering near a 6-month low, and 2013 marked the first annual decline for gold in a decade.

There are just too many headwinds for metals right now. The economy’s improving, inflation is low and the Fed’s talking about tightening monetary policies. While I do believe the government has flooded the economy with too much cash to avoid an extended period of inflation, that inflation isn’t coming in the near-term. Until it does (or the Fed announces some new form of QE) look for investors to put their cash elsewhere. In the interim, I’m betting on bitcoin. Check out my post Bitcoin inflation hedge: The new gold and silver.

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Look for silver prices to average $19.40 in 2014

British banking giant Standard Chartered just lowered its silver price forecast by 5 percent according to Metal.com. They’re looking for the white metal to average $19.40 this year. That’s less than 2 percent below the current price for silver ($19.78 at the time of this writing).

March has been a rough month for silver with prices falling 10 percent from $22 to $19.78. Silver’s now down for the year, and Standard Chartered believes that’s par for the course in 2014. The bank says recent gains in metal prices came on “U.S. growth concerns and safe-haven buying.” Now, they believe those gains went too far, too fast.

I tend to agree. I find it interesting that silver and gold prices have continued to trend down despite the ongoing crisis in Ukraine. If that can’t generate some ongoing safe-haven buying, we’d need an all-out war to drive up silver prices and that’s something no one wants to see.

There are just too many headwinds for metals right now. The economy’s improving, inflation is low and the Fed’s talking about tightening monetary policies. While I do believe the government has flooded the economy with too much cash to avoid an extended period of inflation, that inflation isn’t coming in the near-term. Until it does (or the Fed announces some new form of QE) look for investors to put their cash elsewhere. In the interim, I’m betting on bitcoin. Check out my post Bitcoin inflation hedge: The new gold and silver.

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Netflix (NFLX) shares in a bear market?

Netflix (NFLX) shares have been streaming downward over the past month with the stock shedding 20 percent of its value in 30 days. What’s the standard definition of a bear market? A price decline of 20 percent or more.

What gives? There’s been a barrage of issues plaguing the stock, but I pin the rapid decline on four factors:

1) Profit-taking. Netflix was the best-performing stock in the S&P 500 last year rocketing up more than 300 percent. Weakness in 2014 means big investors are taking profits.

2) Apple + Comcast + Amazon. Rumors about Netflix’s competitors continue to swirl. Apparently, Apple (AAPL) in talks with Comcast (CMCSA) to form a joint video-streaming service. In addition, Amazon’s planning to offer free (yes, free!) streaming content to all web users.

3) Market correction. It’s been risk-off in the market this month, and the Nasdaq in particular has gotten hit hard. While conservative stocks have held up relatively well, tech leaders and biotechs plummeted (Netflix included).

4) New expenses. In the near-term, it looks like net neutrality is going out the window. The two companies that are going to get hit harder than any others by that are Google (thanks to YouTube) and Netflix. Exact costs are unclear, but they won’t be trivial.

These factors have some forecasters poo-pooing Netflix. Wedbush, for instance, just reiterated its $175 price target for Netflix over the next year. That would be a decline of more than 50 percent from current levels.









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