How many gold and silver investors are still hanging in there? Anybody?
Well, chins up, precious metals fans — because 2014 should see a broad range for precious metals prices, from slightly below to well above current levels, with an even broader range expected for silver…
Broad Spectrum of Predictions
Naturally, we’re not surprised to hear long-term silver(NYSEARCA:SLV) bulls calling for higher silver prices going forward.
“Silver To Hit New Highs Despite Bearish Forecasts,” reads a headline from Silverseek.com.
“One Trigger Event is About to Send Silver to All-Time Highs,” proclaims another from The Market Oracle.
But even large, international commodity research firms see the metals bull run as having plenty of life left. Research and consulting firm CPM Group expects to see silver “continuing a secular bull trend that began at the turn of the century.”
Bank of America’s Merrill Lynch (NYSE: BAC) wealth management division expects silver to reach $26.38 next year, up a tidy 35% from current levels. Analysts explained that an improving global outlook in economic activity would buoy silver, which has numerous industrial uses, and should help it outperform gold in 2014.
But we have to be balanced, as there are many other predictions to consider…
Canada’s Bank of Montreal (TSX: BMO), for instance, recently reported it was neutral on silver and gold, setting $21 and $1,275 targets for the metals in 2014, a mere 10% and 5% above today’s levels. Still not a bad return, though.
Meanwhile, for its guess on the number of jelly beans inside the jelly bean jar, Thomson Reuters GFMS last month released its call for an average silver price of $20.42 next year, citing a “strengthening U.S. dollar (NYSEARCA:UUP) and an improving economy plying investors away from the safe-haven investments of gold and silver to equities and bonds.”
And of course, we have Goldman Sachs (NYSE: GS), never shy about killing the party with its 2014 estimates of 15% lower gold prices,(NYSEARCA:GLD) which would drag the more volatile silver down at least 20% to below $16…
2014 Supply and Demand
Obviously, supply and demand is always to be considered when projecting future prices.
U.K. Barclays Bank believes “[the] silver mine supply looks healthy and continues to grow unabated across regions. Having grown by an average of 3% y/y since 2004, we expect mine production to grow 1%-2% y/y in 2013 and in 2014,” which it revealed in its September report.
Though increased supply drives prices lower, if demand increases at a faster pace, any extra supply would be quickly soaked up and possibly result in a shortage.
“As of now,” notes Commodity Online, “silver is witnessing good retail and industrial demand.”
Much of that demand will come from an expected improvement in global industrial production. “By 2014, a somewhat more sustained recovery is envisaged,” the GFMS report indicated. “A global recovery of the auto market and a continued rebound in housing and construction will lift industrial demand for silver to a record 511 million ounces by 2014.”
Since “over half of all silver is used to make cars, computers, photovoltaic power systems and… synthetic fibers… an increase in global industrial activity” would predictably result in “an increase in the industrial demand for silver,” the report stressed. “Some products [such as electronic pads] did not exist until just a few years ago, so although their individual silver content is modest, they nonetheless represent silver demand that simply did not exist before.”
Investment Demand to Continue
Of course, we mustn’t omit the investment demand for silver coins and bars, which has surged from China to America and everywhere in between.
“Investors are expected to step up their purchases, backed by expectations for strong capital appreciation amid rising industrial demand for the metal. In this scenario, silver prices could rise rapidly, possibly touching fresh record highs,” CPM predicts — even if the firm is willing to give silver as much as 10 years in which to do that.
Yes, these “reputable” firms are concerned about their reputations, and so they are naturally going to play it safe with their estimates.
But once you pop the cork, you’ll be hard-pressed to get it to fit back in the bottle again…
When investor interest in silver shot like a cork back in 2007, the silver genie was let out of its bottle. No matter how low the price goes now, we’ll never be able to bottle up silver’s investment demand again.