2013 has been a rough year for silver. Prices for the precious metal have fallen nearly 30 percent when they opened trading in January around $31 an ounce to today’s price of roughly $22 an ounce. It’s the definition of a bear market. We’re seeing a series of lower higher and lower lows that’s best illustrated by looking at an annual chart for the white metal:
Numerous factors have been working against the metal this year. Specifically:
- Lower-than-anticipated inflation.
- Economic growth in the U.S.
- The likelihood that the Federal Reserve will soon start tapering its aggressive bond-buying program.
- Economic uncertainty in China and the Euro-zone, which strengthens the dollar.
And yet, I remain convinced that the U.S. faces significant inflation and higher interest rates in the future, and that could lead to yet another surge in the price of precious metals, commodities, and perhaps even Bitcoin (check out my post on How to buy Bitcoin). I’m not alone either. While there are bears out there, a lot of forecasters are predicting higher silver prices in 2014 and beyond. Let’s take a look at the top 2014 silver price predictions:
- $60 an ounce in 2014: So says MoneyMorning writer Tony Daltorio who expects prices to close out 2013 somewhere near $40 an ounce (something I’m skeptical of).
- $36 an ounce in 2014: Silver is undervalued at today’s prices says Steve Nicastro at SeekingAlpha. He bases his assessment on the gold-silver ratio. “A conservative estimate of the gold:silver ratio at 35:1 would put silver at $36 an ounce at the current gold price,” he writes. “With gold at $1,500, silver would sit over $42 an ounce. With gold back at the 2011 highs of $1,900 an ounce, we could see silver top $54 an ounce, or higher.” Look for next year’s gold prices to see if and when silver is over- or undervalued.
- Look for “record silver prices within the next 10 years.” It’s not a very helpful forecast, but that’s what the CPM Group is forecasting. They’re staking their prediction on increased industrial demand for the metal.
- $21 an ounce in 2014: That’s BMO Research‘s forecast for the average silver price in 2014. They even revised that higher from $18 an ounce in October. Wow. Talk about being bearish. It’s almost enough to turn me into a contrarian.
- Look for a surge in metals prices “late in 2014” according to Thomas Paterson. Paterson argues that household deleveraging has kept inflation tame. Once the average American has paid down enough of their debt to start making substantial purchases, inflation will grow rapidly as money velocity speeds up. Gold and silver prices will surge as that happens, Paterson believes. He argues that late in 2014 will “be time to bet the ranch on gold.” I’m extending his argument to silver, too, though I would never say you should “bet the ranch” on any single investment.
- $27 to $28 an ounce in Q2 2014: That’s the latest prediction from Victor Kerezov. Kerezov believes silver prices will remain muted through the first quarter of 2014.
Of course, there needs to be a reason for silver prices to move higher. Specifically, we need a catalyst – some pronounced trigger or indication that it’s time to start buying metals again. Those triggers could include:
- An increase in economic stimulus from the Federal Reserve or congress.
- A sudden jump in inflation.
- Short covering (buyers who are betting against silver start covering their bets).
- Growth in physical demand or a supply shortage due to mine closures. The solar industry, for example, could drive increased demand for physical silver.
Once any of those triggers are hit, the rest could follow quickly and we could see a surge in silver prices reminiscent of 2011.