Many investors are asking themselves, “When will silver go up?” Unfortunately it’s tough to get a straight answer, even from experts.
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It’s no secret that silver can be an incredibly volatile precious metal. In 2020 alone, the white metal has seen price levels ranging from about US$12 per ounce to US$18.
Many investors are confused by silver’s movement. After all, the precious metal is a safe haven asset that generally fares well in times of turmoil, and the past year has been packed with tense political events — not to mention the coronavirus pandemic and the resulting global economic impact.
Unfortunately, answering the question, “When will silver go up?” is tricky. Even seasoned analysts can’t tell the future, and it’s difficult to find a consensus on the topic of when it will enter a bull market.
Nevertheless, it’s definitely possible to track down different opinions on the topic. Market participants interested in investing in silver would do well to keep them in mind as they try to determine where the price may move in the future.
When will silver go up?: Silver year-on-year
To approach the question, “When will silver go up?” it’s useful to look at its past performance. As mentioned, the silver price has had ups and downs over the past year, including a steep drop from the US$17 level to a low of US$11.94 this past March, and a recovery to a high of US$18.28 in early June.
It’s helpful to look at gold price drivers when trying to understand silver’s price action in the last year. Silver is of course the more changeable of the two precious metals, but nevertheless it often trades in relative tandem with gold bullion.
For gold, and by extension, silver, a key price driver lately hasn’t been so much supply and demand, but uncertainty. As noted, the past year has been filled with major geopolitical events like tension between the US and other countries such as North Korea, China and Iran. Those and other developments have been major sources of concern for investors in the precious metals market.
Precious metals investors have also been closely following the US Federal Reserve’s interest rate plans. Rate hikes are generally negative for physical silver and gold prices — that’s because when rates are higher it is more profitable to invest in products that can accrue interest.
Market participants who are looking to invest in silver and wondering, “When will silver go up?” will want to watch what central banks do. In July 2019, the Fed began cutting interest rates for the first time since 2008, dropping interest rates by a quarter point to a range of 2 to 2.25 percent. Since then, the Fed has slashed interest rates to zero. As of this June, the Fed had no plans to hike interest rates any time soon, and in fact some economists at the central bank are arguing for sub-zero interest rates.
When will silver go up?: Silver supply and silver demand
With the silver price enjoying some momentum, investors are keen to know what may come next. They continue to ask, “When will silver go up?” and are on the lookout for catalysts that may drive it higher.
Moving forward, geopolitical events, the global socioeconomic impact of the coronavirus pandemic and future Fed rate changes will be key factors to watch. As the US and China continue to be embroiled in longstanding trade tensions and gold continues to climb, silver may be looking at a stellar 2020.
But what about silver supply or silver demand? Interestingly, the latest World Silver Survey, published by the Silver Institute and Metals Focus, indicates that in 2019 the silver market experienced a decrease in mine production even though overall global silver supply increased by 1 percent.
In 2020, mine production is expected to fall 5 percent to 797 million ounces, while overall global silver supply is expected to sink by 4 percent to 978 million ounces. That would be the lowest level in global silver supply since 2009.
On the silver demand side, the industrial segment contributed to increased consumption in 2019 as a result of automotive electrification and a resurgence in photovoltaics. “Photovoltaic demand registered an impressive 7 percent increase in offtake, rising to its second highest annual level,” as per the report.
Investor demand for silver also recorded its highest increase since 2015 last year, climbing 12 percent to reach 186.1 million ounces. Holdings in exchange-traded products experienced the largest annual growth since 2010, up 13 percent to 728.9 million ounces.
For 2020, look for growth in physical silver investment such as silver bullion coins and silver bars. This silver market segment should see a third year of growth, rising 16 percent to 215 million ounces. “Silver physical investment is forecast to extend its gains this year, with a projected 16 percent rise to a five year high as investors rotate out of equities in search of safe haven vehicles,” notes the report.
When will silver go up?: Silver in the future
While the silver price forecast is impacted by supply and demand, it is also heavily influenced by investors who often buy precious metals as safe haven assets during times of economic or political uncertainty. The World Silver Survey predicts silver prices will hit US$19 by the end of 2020.
Based on silver’s critical role as a currency hedge and modest growth expected in industrial demand, a January report by Scotiabank estimates a silver price range of US$15 to US$23 for the year ahead.
But predicting silver prices this year and into 2021 has been complicated by the coronavirus pandemic. Speaking to the Investing News Network, Philip Newman, director of Metals Focus, emphasized that the coronavirus pandemic has brought a lot of uncertainty into the silver market.
“To say it’s cast in tremendous uncertainty is an understatement. We realized that with the figures we put together, we had to make a judgment call,” he said. “We didn’t want to be sensationalist in our views. But we fully recognize that this is probably one of the most uncertain forecasts we have ever put out there.”
Of course, there’s also the question of manipulation — experts such as Ed Steer of Gold and Silver Digest and GATA believe that the silver price is controlled by entities like JPMorgan (NYSE:JPM) and will not rise significantly until these players allow it to do so.
However, these factors don’t mean that the silver price will never again reach its highest price of nearly US$50. In fact, Chris Marcus, founder of Arcadia Economics, who is the author of the book “The Big Silver Short,” has described the white metal as “an amplified version of gold,” and said he’s surprised to see the white metal trading where it is.
Watch the full interview with Marcus and Brien Lundin above.
“I look at what happened in 2011, that’s what the book gets into,” said Marcus in an interview with the Investing News Network. “Either the price came down because they sold a lot of paper that they can’t back up, or maybe there’s another explanation. But if that is correct, to me US$50 seems like a floor whenever a free market comes back.”
If the metal continues rise this year, reaching its highest level will become more plausible.
For investors, a key point to remember is that the resource space operates cyclically — while a commodity like silver can experience price rises and falls, ultimately what goes up must come down, and vice versa. The advice to “buy low and sell high” is repeated often for a reason, and though it’s nigh impossible to predict market bottoms, at today’s price, now may certainly be a good time to flex your purchasing power and buy silver.
This is an updated version of an article first published by the Investing News Network in 2015.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.