What’s in store for silver in the future? Keith Neumeyer of First Majestic Silver recently said he sees the white metal reaching $130 per ounce.
The silver price reached a high of just over $20 per ounce in 2016, but has not made significant gains so far this year. Nonetheless, Keith Neumeyer believes the white metal could reach $130 per ounce.
This isn’t the first time Neumeyer has made a bold silver price prediction. Last year, Neumeyer, who’s president and CEO of First Majestic Silver (TSX:FR,NYSE:AG), raised eyebrows when he predicted that silver could reach a high of $1,000. In a November 19 interview with Palisade Research, he gave a more modest prediction of $130, saying the precious metal is being bolstered by technology along with other factors.
Neumeyer said that market needs to return to some “sane-ness,” and that institutions need to “start to recognize the valuations of some of the mining companies and stocks.” Here’s why he thinks that needs to happen and what he thinks it will take to bring the silver price up to $130.
Silver in the future: $130 per ounce?
There’s still a significant distance for the silver price to go before it reaches the success Neumeyer has boldly predicted. In fact, in order for the precious metal to jump to $130, its value would have to increase by over seven times what it is currently.
Neumeyer sees $130 silver in the cards in part because he believes the current market compares to the year 2000, when investors were sailing high on the dot-com bubble and the mining sector was down. He thinks it’s only a matter of time before the market corrects, like it did in 2001 and 2002, and mining sees a big rebound in pricing. It was during this time that Neumeyer himself invested heavily in mining and came out on top.
He pointed to repeated gains in the NASDAQ Composite (INDEXNASDAQ:.IXIC) and S&P 500 (INDEXSP:.INX), and noted, “billions and billions of dollars are being thrown into these markets, and if the mining sector even got a small percentage of that money it would light up quite dramatically … I think that’s exactly what’s going to happen.”
The CEO also stated that while times have been tough in the mining sector since 2012, many companies have since recovered. He believes investors will see increasing production as cash flow increases and technology infuses the mining sector. Neumeyer also anticipates a steady increase in mining efficiency over the next 10 years, which will be reflected in the value of silver.
Speaking about the current price of silver, Neumyer said it is “a bit of a joke.” He mentioned various other metals that have doubled in price, such as lead, while silver has seen little movement. He believes the metal should be uncoupled from gold, and should be seen as a strategic metal due to its necessity in many everyday appliances. He also stated that silver production has gone down in recent years, meaning that contrary to popular belief the metal is actually a rare commodity.
Silver in the future: What others say
While Neumeyer is one of just a few saying silver is poised to reach a triple-digit price, there is support for his belief that the metal is undervalued and that “ideal conditions are present for silver prices to rise.” These conditions include low interest rates, overvalued markets and a monetary system overcome with indebtedness. And many are on board with Neumeyer in the idea that mining has entered a bull market.
So, if the silver price does rise, how high will it go? Let’s look at silver’s recent history. The highest price for silver was just under $50 in the 1970s; it came close to that level again in 2011, but has been much lower lately. In 2017, the highest silver has gone is just under $18.50.
In a recent FocusEconomics report, analysts surveyed said they see the white metal averaging $17.30 in 2017 and $17.80 in 2018; by Q3 2019, the last quarter for which statistics are given, they believe the average silver price could be as high as $19.20. Overall, it appears as though the general consensus is that the silver price will increase moving forward, but will do so much more marginally than Neumeyer believes unless there is a major catalyst.
Will the price of silver really reach $130? What do you think? Tell us your predictions in the comments.
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This is an updated version of an article originally published by the Investing News Network in 2016.
Securities Disclosure: I, Amanda Kay, hold no direct investment interest in any company mentioned in this article.