Forecasting the price of a commodity is always an interesting challenge and many experts do their best to try and provide an accurate forecast. So first of all I will mention a few things that have impacted the price of silver in the past year and in recent times.
2019 was an eventful year for the price of silver, and in particular, within the third quarter. In the beginning of August the price of silver was US$16.18 and then surged to US$19.57 marking a 21% price increase. The price of silver rebounded from its 2018 losses to end the year up about 7 percent.
Events that are thought to have been contributors to an increase in the price of silver include, but are not limited to:
- Interest rate cuts by the US Federal Reserve that had a positive impact on the price of gold and proved advantageous for silver as they cut interest rates three times in 2019;
- Industrial demand for silver has continued to rise in its use in solar panels and electronics;
- Geopolitical strife between China and the US;
- Turmoil between the US and Mexico;
- Issues in the Middle East; and,
- Political global uncertainty.
The CPM Group have noted in their 2020 price forecast that “For 2020, silver will pick up momentum and a high of US$22 (per ounce), which is about a 30 percent gain from where we have been in 2019.”
Similar optimism on the price of silver has been echoed from a number of other industry players. Rick Rule of Sprott in a recent presentation at the 2019 New Orleans Investment Conference noted that silver has a “speculative upside”. He added, “In the last 40 years gold has led, silver has followed. But silver has gone beyond that when the silver prices begin to validate the silver thesis and the money moves from the bullion to the equities.”
I could quote many others with similar optimism and those who are pessimistic about the future price of silver. However, I do think one thing is clear. The worldwide demand for silver is growing steadily each year. In the long term, solar and electric vehicles could become fundamental drivers in the silver sector as demand in those areas is expected to triple over the next five years. And like other commodities such as base metals, supply and demand fundamentals will play their role in the future price of silver. I encourage everyone to stay on top of worldwide events and learn how they impact metals like silver and regularly track industry leaders and what CEO’s of major silver producing countries are saying about pricing to form your own opinion on future prices. It sure is an interesting ride at times!