In 2017, silver prices oscillated between about $15.50 and $18.50 per ounce. Experts were not necessarily surprised, but many had hoped for a better performance.
Now that 2018 has begun, market watchers are beginning to look toward the future. As of Friday (January 15), the white metal’s highest price year-to-date was $17.37.
Are silver prices going up this year? Given that 2017 was gold’s best year since 2010, many are wondering why silver is not faring better, and are calling for larger gains.
Read on to learn about three factors that could affect silver prices in the new 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.
3 factors that could affect silver prices
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 Louis James, editor of the International Speculator, in early 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, particularly with regard to North Korea. He’s been described as “flirting” with war, and North Korea has allegedly ramped up its nuclear weapons development. If that malaise continues or worsens, or if other issues are introduced elsewhere, silver prices could increase.
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.
It’s too soon to tell what may happen, but it’s worth noting that precious metals prices could keep rising even if rates do 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
So 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 in 2018, about flat compared to the current level. 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
Alas, we have no crystal ball here. While most say 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 let’s keep our ears to the ground and see what happens in terms of the three factors mentioned above. With geopolitical factors, interest rates, manipulation and myriad other factors in play it’s crucial to stay on the ball.
Do you think silver prices are going to finally surge this year? 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, currently own shares of First Majestic Silver, but hold no direct investment interest in any other company mentioned in this article.