All told, silver prices shot up more than 80 percent in 2010. Who knows where silver prices will go in 2011, but taking a look at the precious metal’s returns over the past decade could give us a rough idea. Based on analysis from Jeff Clark at CaseyResearch.com, silver forecasts of $50 per ounce in 2011 don’t seem unreasonable.
First, take a look at the past decade’s returns for silver (see Clark’s chart to the left). Excluding the decline in silver prices in 2001 before the start of the bull run in metals, the past decade averaged a silver return of 27.5 percent. If silver returns that average in 2011, expect the metal to rise to $39.41 per ounce.
With the threat of ongoing currency devaluation around the world, though, it’s not unrealistic to expect silver to match or come close to 2010’s returns. If silver matches 2010’s returns in 2011, look for the metal to rise to $56.22 this year.
If you really want to jump into the deep end of the pool, let’s look at where silver might go if it matched the all-time record gains the metal set in 1979. Silver price manipulation and the threat of rampant inflation pushed prices up more than 267 percent that year. If silver did the same in 2011, we’d be looking at prices of more than $113 per ounce by the end of the year.
If the Fed can manage to keep the dollar from crashing this year, gains will be subdued. If inflation sets in (as many investors have been calling for since 2008), expect returns to be substantial. Either way, silver at $50 per ounce in 2011 doesn’t seem out of the question, and the recent dip in prices might be a great buying opportunity if you haven’t added the metal to your portfolio yet.