Are silver prices going up in 2018 after lackluster gains last year? Learn what experts think, and then take our poll to let us know where you stand.
Are silver prices going up? That’s the big question silver investors want answers to.
So far in 2018, prices have oscillated between about $15.70 and $17.55 per ounce. Experts are not necessarily surprised, but of course many are hoping for a better performance before the year ends.
Read on to learn about three factors that could affect silver prices this year, and to see what price predictions key firms have made. Then take our poll to let us know where you think prices are headed.
1. Geopolitical issues
Like gold, silver prices often increase when geopolitical issues are at play. When Donald Trump won the US presidential election in late 2016, many believed safe-haven demand for precious metals would spur higher silver and gold prices. “Trump is … a source of instability, which markets don’t like, so this is very bullish for safe-haven assets,” said Lobo Tiggre, CEO of the Independent Speculator, in 2017.
However, that instability hasn’t yet translated into higher silver prices. Will that happen in 2018? It’s possible. Trump continues to cause concern, having formerly been described as “flirting” with war with North Korea, and now clashing with China and Russia. The president is locked in a trade war with the Asian nation, with both the US and China imposing tariffs on each other.
So far this has hit prices for many metals, including silver, which was down over 5 percent year-to-date as of mid-July. This runs contrary to conventional wisdom that political unrest favors safe-haven assets. Investors will have to see if this trend changes as these and other geopolitical issues continue to develop.
2. Interest rates
In general, higher interest rates tend to put pressure on non-interest-bearing assets like gold and silver; conversely, when interest rates are lower, precious metals tend to perform better. However, last year there were three rate hikes, and gold prices rose instead of falling, while silver was relatively flat.
The US Federal Reserve has raised rates on the back of an economy that has been “chugging along,” but it could slow the pace of rate increases if there is a change. Currently there is no consensus on how many hikes there will be in 2018, although the central bank is expected to keep raising rates. Indeed another rate hike happened again in June, making it the seventh in the past three years.
It’s too soon to tell if more hikes are in store, but it’s worth noting that precious metals prices could rise even if rates continue to increase. According to Investopedia, despite the widely held belief that there is a negative correlation between rates and precious metals prices, “a long-term review of the respective paths and trends of interest rates and gold prices reveals that no such relationship actually exists.”
3. Price manipulation
No silver price discussion would be complete without a mention of price manipulation. Some silver market watchers believe that the reason prices have seen little momentum in recent years is that a small group of institutions has been shorting silver. Ed Steer of Gold and Silver Digest and the Gold Anti-Trust Action Committee has explained the idea in the past, noting that JPMorgan (NYSE:JPM) and a handful of others are involved.
There is much debate about this concept, and some say that it’s unfounded or imaginary. That said, JPMorgan has been taken to court before over manipulation allegations — charges against the firm were dismissed in 2014 and again in 2016, although the 2016 charges have since been appealed. The issue is complex, and it would perhaps be wise to watch for further developments moving forward.
Analyst forecasts for silver prices
Are silver prices going up in 2018? Panelists polled by FocusEconomics see prices increasing in 2018, but not by a lot. As a whole, they expect prices to average $17.50 this year, which is higher than the metal’s current level but still far from what silver investors have been hoping and waiting for. Here’s a list of the average 2018 silver predictions given by some of the respondents:
- Capital Economics — $16.30 per ounce
- CIBC — $18.10 per ounce
- Deutsche Bank (NYSE:DB) — $17.60 per ounce
- JPMorgan — $18.70 per ounce
- RBC Capital Markets — $19.40 per ounce
- Standard Chartered (LSE:STAN) — $18.90 per ounce
Of course, some experts are much more bullish. For example, Keith Neumeyer, president and CEO of First Majestic Silver (TSX:FR,NYSE:AG), recently said he believes we’ll see silver prices rise to $130.
Alas, we have no crystal ball here, and many of the educated guesses out there are just that. While most markets watchers say it’s only a matter of time before silver prices rise, how long that will be is nearly impossible to tell. But keep an eye out and see what happens in terms of the three factors mentioned above. With geopolitical factors, interest rates, manipulation and myriad other factors in play, staying abreast of these topics can determine your investment strategy moving forward.
Also keep in mind that while fortune favors the bold, it also can favor patience, and precious metals tend to be part of a long-term portfolio.
Are silver prices going up this year? What do you think? What key indicators do you look for? Share your thoughts by answering the poll below or by leaving a comment.
This is an updated version of an article first published by the Investing News Network in 2016.
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Securities Disclosure: I, Amanda Kay, hold no direct investment interest in any company mentioned in this article.