2016 silver price predictions: Look for a recovery

Four years ago, analysts everywhere were making predictions about the price of silver. Now, it’s hard to find anyone talking about it. Paul Mladjenovic, author of Precious Metals Investing for Dummies, believes prices for the white metal will bolt higher in 2016, though. Indeed, he believes silver has a “strong chance at hitting” $25 to $29 next year (source).

Adam Koos, president of Libertas Wealth Management Group, agrees without giving a specific price target. He expects silver to start a bull run late in 2016. “Take a little hiatus until 2016 … when the US president will be a huge question mark, US stocks will most likely pick up in volatility and any rate increases will have already been priced into the metals,” he told MarketWatch.com this summer.

Kunal Shah, head of commodities research at Nirmal Bang Commodities, believes silver prices should settle between $16.95 and $17.40 per ounce by the end of 2016. “Industrial demand has remained very strong from electrical, solar and various industries so we recommend that any decline in silver prices now should be used as excellent buying opportunity,” he says (source).

That falls in line with silver price predictions from a Reuters poll over the summer. Polled analysts expect silver prices to recover to $17.21 an ounce in 2016 (source).

RBC analysts expect silver prices to be around $19 an ounce by 2018 (source). That’s roughly 20 percent higher than today’s silver price of $15.50. That’s not exactly a big surge. RBC is, however, bullish on a handful of gold and silver stocks. While silver prices have plummeted, stocks in the sector have gotten hit even harder. They should start recovering rapidly as the price of silver drifts higher.

One of the biggest silver bears I can find is Jing Pan, a research analyst and editor at Lombardi Financial. Pan believes we could see a squeeze next year that might push silver prices up to $31 an ounce (source). He cites decreased mining activity, elevated demand and a skewed gold-silver ratio as the major drivers. Today’s gold-silver ratio hovers around 72:1. If we get to 35:1, we’d be around Pan’s target price, and that’s still far higher than the “natural” gold-silver ratio of 17:1.

Interestingly, 2015 is expected to be the first year in 12 years that silver mining output will actually decline. “We’re just not seeing the investment in new mine capacity that would be needed to sustain continued record peak production,” Andrew Leyland, an analyst with GFMS, told the Wall Street Journal. GFMS forecasts silver prices will average $16.50 an ounce in 2015, and rise to $17.50 an ounce in 2016.

Photo credit: Loopack.

2016 silver price predictions: Are we headed up or down?

Let’s take a look at the latest silver price predictions for 2016 as part of our Three-up and Three-down series. We’ll present three bullish arguments for silver prices and three bearish arguments as well. Then, you decide where you think silver’s headed next year.

The bullish case for silver in 2016

1) Devaluing the yuan. Earlier this year, China abruptly announced it would devalue the yuan by 2 percent against the U.S. dollar. The government wanted to spur economic activity in the People’s Republic. Instead, they spooked currency traders who started selling the yuan. In turn, that forced China to start selling some of its dollar holdings, so the country could buy its own currency. That heavy selling is putting downward pressure on the dollar. Some speculate it could lead to a considerably weaker dollar, which might encourage more investment in hard assets like gold and silver. Gaurav S. Iyer, a research analyst and editor at Lombardi Financial, speculates that the weaker dollar might push silver back toward its 2011 peak around $50 an ounce.

2) Supply strain. Most of the silver that’s mined in the world is a byproduct of mining for other metals (copper, zinc, gold and lead). Since metal prices have fallen across the board, mining companies have drastically cut expenses and lowered their production levels by shuttering some mines. Less gold, copper and zinc means less silver, too. “Take Canada, one of the world’s major silver producers, for example,” writes Michael Lombardi. “Year-to-date, silver mine production in Canada has declined by 20%.” This could lead to a silver supply crunch if the global economy starts picking up steam (as many expect it to do next year). That’s because silver’s used extensively in many high-tech products.

3) A skewed ratio. The silver-gold price ratio is north of 70. Put another way, an ounce of silver costs more than 1/70th the amount of an ounce of gold. “Over the last 40 years, the grey metal averaged a 42.8 conversion rate with gold,” Iyer writes. “History has shown that a rise in silver prices are all but guaranteed when the ratio tops 70. It’s sitting at 75 right now.” According to him, that means we could see silver prices surge 420 percent from where they are today.

The bearish case for silver in 2016

1) A strong dollar. China’s devaluing the yuan. India and the Eurozone are increasing their quantitative easing programs, and the U.S. Federal Reserve is planning to hike interest rates this year or early in 2016. All signs point to a strengthening dollar. And that negates one of the most powerful incentives to invest in silver: using it as a hedge against a dollar collapse.

2) Deflation. What will be the biggest determinant of silver prices in 2016? Whether we see inflation or deflation. Since precious metals have a finite supply, they act as a hedge against inflation (much like real estate and even stocks). When we’re in a low-inflation environment – or worse, a deflationary environment – it just doesn’t make sense to hold a large position in silver. Across the globe, signs are pointing toward deflation. Credit default swaps are rising, currencies in emerging countries are declining (a sign of slowing global growth) and the rising dollar is disproportionately punishing companies outside the U.S. If we tip toward deflation, we’re probably not going to have rising silver prices.

3) The bear market continues. I always follow momentum until that momentum is broken. Silver’s down more than 70 percent from its 2011 peak. The metal is in a bear market, and I’m not ready to call a bottom yet. Neither is JP Morgan.

Here’s their 2016 silver price prediction: “Silver prices will broadly continue their bearish trend for the coming two quarters before finding greater strength in the second half of 2016,” they said early last month. Specifically, JP Morgan is predicting silver prices will average $14.08 in Q1 of 2016 and $14.65 throughout the year.

Where do you think we’ll see silver prices in 2016?

Where will silver prices go in 2015?

Silver price forecasters are all over the map in their predictions for 2015. It’s hard to deny there’s something interesting happening in the silver market, though. After falling 20 percent in 2014, silver prices have surged nearly 10 percent in the first six weeks of 2015 with prices now hovering around $17.25 per ounce.

Continue reading “Where will silver prices go in 2015?”

3 reasons silver prices could head higher in near-term

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). If you believe we’re in a longer-term uptrend for precious metals, that means we’re likely nearing a bottom in silver prices.

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.

Five factors propelling silver prices higher in 2014

Tepid growth, China and base metals mining are just a few of the factors contributing to bullish arguments for silver prices.

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.

Look for silver prices to average $19.40 in 2014

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 prices. 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.

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.

Watch out below: Silver prices low and heading lower

At prices below $20 an ounce, silver is now flirting with 3 month lows. And it may have further to fall. In fact, I wouldn’t be surprised to see it hit new lows for the year and then target lows we haven’t seen since 2010.

At prices below $20 an ounce, silver is now flirting with 3 month lows. And it may have further to fall. In fact, I wouldn’t be surprised to see it hit new lows for the year and then target lows we haven’t seen since 2010. There are just too many headwinds out there. To name a few:

1) Inflation is anemic at 1 percent.

2) Stocks are outperforming other asset classes. They’re paying great dividends and carry much less risk. Why invest in precious metals and watch your capital shrink when you could buy shares in Wal-Mart (WMT), be up 15 percent on the year and be earning a 2.3 percent dividend?

3) The Fed surprised the market by signaling that tapering is “in the cards relatively soon.” That doesn’t sound very damning in and of itself, but officials took it a step further when their recent meeting minutes revealed they were willing to taper even if the job market wasn’t improving significantly.

That says one of two things to me:

a) The Fed is nervous about inflation.

b) The Fed trying to head off an asset bubble in stocks.

Inflation worries just aren’t here yet. That means, Option B is likely with two of the three leading stock indices at record highs. On the year, the Dow’s up 22 percent, the S&P’s up 25 percent and the Nasdaq is up 31 percent. We can’t keep that pace up without some assistance or some serious economic growth – and we’re definitely not seeing serious economic growth.

Silver price predictions

If the bearish trend continues, MIG Bank in Switzerland is predicting that we’ll test silver’s summer lows around $18.23 an ounce (per Bloomberg). That’s 8.7 percent below the current price of $19.98. If we do close below this summer’s low of $18.23, silver could tumble precipitously. Indeed, we might not find real support until we hit 2010 lows around $15 an ounce. That would be a plunge of 25 percent.

Of course, if we do see a big sell-off in silver, I don’t think it will be long-lived. Check out my post Silver price forecasts and predictions for 2014. I do however wonder if Bitcoin’s stealing some of the white metal’s luster, and I’m quite a bit more bullish on it than I am on precious metals right now. Check out my post Bitcoin inflation hedge: The new gold and silver to learn why. And, if you like that, you’ll love this: The case for bitcoin at $100,000.

Silver price forecasts and predictions for 2014

Silver prices have taken a beating over the past two years. Will 2014 be the year when they finally break free again?

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.

Why silver investors should stay away from silver coins

There is nothing wrong with collecting coins if you ARE ALREADY A MILLIONAIRE. If you are not then you need to sell your coin collection right now to the highest bidders.

-Posted by Alejandro Guillú Mendoza

Introduction

This article tries to explain in a simple way to readers without a college degree in economics or finance some macro economic factors that are currently changing the global supply and demand of silver.

Ground rules

Silver coins ARE NOT INVESTMENTS. Silver coins are still minted by countries to satisfy the unlimited demand for numismatists around the world. When you acquire a silver coin you are not only paying for the precious metal itself but also for the graphic design and for the minting.

Countries make billions of dollars each year buying silver by the ton and reselling it as coins.

There is nothing wrong with collecting coins if you ARE ALREADY A MILLIONAIRE. If you are not then you need to sell your coin collection right now to the highest bidders.

The problem with silver coins is that you need to pay for insurance each year and that cost eats some of your profits.

If you want to invest in silver then you need to buy either a silver mine or the ETF SLV. There are other financial instruments for more sophisticated investors that I am not going to cover in this article. If you want me to write about them then drop me a line.

Does Apple buys a lot of silver?

Silver is the best conductor for electricity, and in some cases the cost is not as important and it is used instead of copper which is cheaper (i.e. for small, complex electronics). One easy way to predict if we will buy more technologically advanced things made with silver is to closely watch the global GDP. If the world is expanding then it is likely that we will build more expensive things made with silver.

You can read the World Economic Outlook published by the IMF.

If you want to invest in silver, then you need to keep an eye on the price of copper because this metal is used only because silver is too expensive. If the price of copper starts to rise too much, then some companies may just decide to switch to silver.

Obviously, this is just a theoretical point. In reality, Chile, Peru, Argentina, Brazil and Mexico won’t let that happen, and they will just lend billions of dollars to publicly-traded copper mining companies to keep the price of copper low.

Digital cameras for everybody

Silver nitrate has always been used for photographs, and over half of all the silver mined was used for this before the digital camera was invented. This number is getting smaller and smaller every year, and one day we won’t use silver nitrate anymore. That would increase the number of silver available for other industrial uses bringing down the price of silver in the future.

If you are a politician in a country with a very limited supply of silver, then you need to reduce the demand for silver nitrate in your country as much as you can with the expansion of access to digital cameras to the general population.

Let companies like Nikon, Olympus and Canon import digital cameras without paying any taxes.

Allow these companies to issue Visa, MasterCard, American Express, Discover, UnionPay and JCB credit cards to buy their digital cameras insured by the government.

More than 90% of the world’s silver is produced in Mexico, Peru, China, Australia, Russia, Chile, Bolivia, Poland, the United States and Canada. If these countries reduce their own consumption in silver nitrate, then they will have more silver for export.

As you can see, the price of silver is not really about finding more silver mines but about finding smarter ways to use LESS SILVER.

What is the Protect our Silverware Act?

Most people with silver jewelry, silverware or silver coins are wealthy, and they don’t lose any money every time a burglar enters their house because they’re reimbursed by insurance. The rest of us are hurt by the insurance companies because every time they write a check to pay for these crimes, they increase the bill for all of us.

If less silver is stolen then the prices we pay to protect our homes will be reduced over time.

It is a known fact that burglars only steal from you when you are not home. A very popular trick among thieves is to call everybody until you get an answering machine. I strongly suggest you to get rid of your answering machine and just reroute your old telephone to a cell phone answered by one of your employees in China, India, Indonesia, Brazil, Pakistan, Nigeria, Bangladesh, Russia or Mexico.

You can hire one on Elance for just a few cents per hour.

I propose a new law that will force any silver seller to register every silver buyer into a national database and each silver holder will be forced to hire a silver sitter when they are not home.

Let’s say that you are going to leave town for a few days on business. You call the Silver Police and they will send you an employee that will stay in your home for a few days until you return. Each silver holder will pay a “Silver Police Tax” each time he buys something made of silver to pay for this new Police Department.

This will reduce crime among families holding silver and will also reduce unemployment.

Conclusion

I believe these 10 countries will enact new smarter laws to keep the domestic supply of silver very tight and will also increase silver exports to other least developed countries with more loans to small businesses exporting jewelry and mirrors and other clever measures like a silver stamp that you can use to ship any item made of silver to an eBay or Amazon buyer in another country.

Top 10 silver price predictions for 2013

Where have all the silver bulls gone? Price predictions for the white metal are all over the board in 2013.

Posted by Alejandro Guillú Mendoza.

Many people around the world want to know the answer to the question, “Where is silver going?”

I invested several hours browsing the Internet searching for answers to save you time and money (because time is money, after all). Have another financial question? Drop me a line. Please don’t ask me where your lost kitten is or why she left you. Ask me about topics that can make you money, like silver!

Here are my findings on the latest silver price predictions for 2013, 2014 and beyond. The prices are sorted from low to high:

1) $26 Barclays according to CommodityOnline

Barclays believes strong production growth in mining will knock silver prices down and keep them low in 2013. “We expect it to grow to 25.2kt in 2013, with the slowdown in output from Australia and Europe being offset by strong growth across South America and Asia. We expect modest growth from the major producers, with Mexico retaining its pole position.”

2) $30-$32 Neil Meader (Head of Precious Metals Research and Forecast) according to Forbes

“For the moment, we would expect to see a continuation of the price volatility that we’ve seen of late.

“The unknown for the longer term is inflation.”

“It would be wrong to assume that a year-on-year price fall automatically presages an end to the multi-year rally; that occurred in 2009 and yet prices (based on the annual average) then more than doubled in just two years.”

3) $31 Deutsche Bank

The bank lowered its forecast last month 16.5% to $31 according to Fox because the demand for stocks over commodities is rising and the growth in the United States of America is improving. The 2014 forecast was also significantly reduced.

Excluding major banks currently in the red. Deutsche Bank is the fifth least profitable major bank in the world with barely $400 million in profits. It appears they are no longer qualified to give financial advice to anybody. Perhaps they should hire me. I can easily turn a profit of $40 million. I am just a regular guy. They have 100,000 employees.

4) $33 HSBC

The bank increased its target for silver from $32 based on four factors driving prices higher: industrial demand, investor appetite, strong coin and bar purchases and a bottoming out of jewelry demand according to the Wall Street Journal.

“Greater industrial silver consumption is one of the most compelling arguments in favor of higher prices.”

5) $34.10 BNP Paribas

The bank reduced its silver 2013 forecast a few months ago to $34.10 from $39.05 according to Reuters.

6) $35 Morgan Stanley

Morgan Stanley is very bullish on silver and selected the precious metal as one of the Top Picks for 2013 according to BusinessWeek.

“Gold, silver and corn will outperform other raw materials next year as a weaker dollar and rising investor demand bolster precious metals while supply curbs aid grains.”

7) $38 Commerzbank according to the Wall Street Journal

Silver is “establishing itself as a precious metal with an industrial character, setting itself significantly apart from gold.”

8) $40.25 Michel O’Brien

Silver To Gain 29% in 2013 – Analysts, Traders and Investors.

“The silver market remains a very small market and this continuing global investment and store of value demand should lead to silver reaching a real record high, inflation adjusted, of over $140/oz in the coming years.”

9) $50-$60 Ge Christenson according to SilverSeek

“This is not a prediction based on wishful thinking and hope, but a best estimate based on rational analysis of data stretching back to 1975.”

“Silver (and gold) will continue to rise, doubling every 3 – 4 years, until our government manages to tame the deficits, the borrowing, and the inevitable inflation.”

10) $91 Equity Management Academy

Silver Doctors started recently in 2011 and they are visited by over 750,000 each month. The video analysis by Steve Roy is only 9 minutes long.

This was the highest forecast I could find at the time of this writing – a time when, admittedly, silver prices are extremely low. It’ll be interesting to see which of the predictions above come the closest to the truth by the end of the year.