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.
One SeekingAlpha writer, Dave Kranzler of Investment Research Dynamics, says 2015 will see a resumption of the bull market in silver after four years of falling prices. His main argument? Silver and gold prices fell so low that precious metal supplies have been depleted.
“I believe that silver will be the best performing asset class in 2015,” Kranzler writes.
Not everyone agrees.
The London Bullion Market Association hosts an annual competition where professional analysts predict gold and silver prices for the upcoming year. Their prediction for silver prices in 2015? They see the white metal losing 12 percent. That would be the fifth year in a row of falling silver prices.
“We believe silver’s lows for the year could test levels not reached since 2009” at $12 per ounce, says Barclays Bank analyst Suki Cooper (source). Bears abound at the LBMA. In fact, just 6 of the 29 participants in the competition see silver prices staying above $15 an ounce. When you average all their forecasts together, though, the LMBA competitors see silver prices averaging $16.76 per ounce in 2015.
Geopolitics will play a key role for silver prices in 2015. Recent bouts of quantitative easing by the EU and the Bank of Japan have pushed investors outside of the U.S. into metals. In fact, “hedge funds and other speculators in futures are the most bullish on gold in two years and have bet more on silver in all but two weeks since the start of November.” That’s according to the Globe and Mail.
Currently, analysts seem convinced that the Federal Reserve’s slowly moving toward a tighter monetary policy. They could raise the Federal Funds rate as soon as this summer (though it’s looking more and more like that move won’t come until the fall). If that happens, the dollar will strengthen, and investors in the U.S. will have little reason to move into safe havens like precious metals.
That assumes that the Fed’s tightening won’t lead to a surge in the value of the dollar. If the dollar goes up much more against foreign currencies, deflation becomes a serious risk. The Fed can’t afford that, and it’s likely we’d see the U.S. join the EU and Japan by loosing up the monetary base yet again. That’d be bullish for silver.
Another bullish factor for silver? Right now, the gold-silver ratio is out of whack. Gold trades at 71 times the price of silver. Over the past decade, the Globe says, that average has been closer to 58. That means silver’s got lots of room to run if precious metals prices spike higher.
Personally, though, I just don’t see it happening yet. We all know inflation’s going to appear in the U.S. sooner or later. That knowledge makes the contrarian in me want to start hoarding silver. But why wouldn’t I just wait until we actually see evidence of inflation? I could put my chips on a bet that inflation is coming, or I could look at other investment opportunities that seem more certain.
Right now, for instance, we know oil prices are low. Who does that benefit? Airline companies and consumers. That’s got me leaning toward airline stocks and consumer retailers. Silver will have its day in the sun. But I’m just not sure that 2015 is the year it’ll happen.
If there’s one thing I’ve learned in investing, it’s that market shifts take a lot longer to materialize than most investors think they will. That’s why people bought Tesla shares at $30 and sold at $60 only to see the stock surge north of $200. In my mind, Newton could have been talking about investing when he said an object in motion will stay in motion until acted upon by an outside force. That force must be substantial and quantifiable. Right now, inflation is a non-starter, and it’ll probably stay that way throughout 2015 – particularly will energy prices dipping so low. Without another massive quantitative easing program from some the U.S., China, Japan, the E.U. or India, I just don’t see a big impetus for a run-up in silver in 2015. Prove me wrong in the comments below!