Blog

Silver’s lackluster performance could continue, say experts

TradingPub Admin | August 7, 2013

Responsive image

Want some free trading education on a highly-visible metal and the potential price movements it could enjoy in the near future?

While you may note that gold has been doing quite poorly this year, having fallen into a bear market and being down 21 percent as of July 30, it is important to keep in mind that silver has depreciated even more in 2013, according to Bloomberg.

In fact, this commodity, which has been described as an industrial metal at some points and a precious metal at others, has had the weakest performance of any component contained in the Standard & Poor's GSCI gauge of 24 commodities, the media outlet reports.

Dire forecasts
Just in case this didn't seem bad enough, several market experts have provided forecasts for the metal which are far from stellar. MarketWatch reports that for the remainder of 2013, silver could trade at a price between $17 and $23 an ounce, according to James Steel, chief precious metals analyst at HSBC.

He stated that price increases for the metal could be suppressed by greater availability of the metal, according to the news source. The market expert also cited the policies of the Federal Reserve as putting downward pressure on the price of silver, and the metal could also be pushed lower by lackluster demand for exchange-traded funds backed by silver.

The forecast for the precious metal comes after it has plunged 35 percent in 2013, according to Barron's. Steel doesn't see it experiencing particularly substantial changes in price for the rest of the year, after it has fallen by this amount.

Price support for silver
While the prediction provided by the HSBC analyst did not involve silver rising in price significantly, it did state that the precious metal will only fall so low in value, the media outlet reports. Steel cited several factors as helping to prop up the price of the commodity.

He noted that demand for the metal from India will provide support for the value of silver, according to MarketWatch. The analyst noted that industrial uses would present another major source of demand. Steel stated that the metal would be purchased for the creation of coins and bars, and he also noted that the jewelry market would hit its low point.

"Greater industrial silver consumption is one of the most compelling arguments in favor of stable prices, and HSBC economics forecasts growing industrial output in key silver-consuming countries in East Asia and the U.S. Coin and bar demand is robust and after several years of decline, jewelry demand appears to be stabilizing," he wrote, the media outlet reports. "Indian imports are robust, where silver demand seems to be benefiting from government policies aimed at constraining gold demand."

Steel also emphasized the impact that investors have on the prices for the metal, according to Barron's.

"Investor sentiment is a key determinant of silver prices, especially in the short term," he stated, according to Barron's. "Investor demand has effectively absorbed excess physical silver created by rising mine output, weak industrial demand, falling jewelry purchases and the plunge in photographic consumption."

Hope for silver
While the market expert provided a prediction for the metal that was not particularly optimistic, he did state that production of the metal will continue to be profitable, since he believes that the cost of producing additional units of the commodity will not rise above the price that the metal can fetch in the market, the media outlet reports.

It is also important to keep in mind that the price of silver could be bolstered in the event that the global economy continues to recover, as industrial use is a major source of the value of the metal.

If you want more free trading education, you can find it at TradingPub, home to some of the top investors and traders in the industry.