Silver – The Best Precious Metal Investment For 2015

Summary

• Silver, a tangible asset, which is recognized as a store of value, its price can be affected by inflation, values of paper currency and fluctuations in interest rates and deficits.
• Silver investors insist on staying exposed to the metal despite its price weakness in 2014.
• Total physical demand for silver stood at a record 1,081 million ounces (Moz) last year.

Silver Price 2014 Projections
Current Price: $16.80/oz
Projected Price: $22/oz
Upside: 40%

Silver Price Forecast

If gold is poised to hit the $1,400 to $1,500 range in 2015, the biggest question for investors is whether a silver rebound will follow. Other precious metals like Silver and Platinum have generally followed the gold price. Silver is currently trading near all time low levels and has toyed with a rebound for months.

While silver prices typically follow in gold’s footsteps, silver has fared worse than gold recently. Gold is down 37% since it peaked at $1,900 in 2011. Silver has shed 67% since topping at $49 that same year. It was down 12% in 2014 alone – compared to gold’s 1% drop. The dearth of new supply, increasing use in industrial activity and the narrowing of silver to gold ratio should provide the driver of silver’s price. Mined silver supply growth through 2019E is low.

Much of this growth is, like existing production, a result of the by-product output from gold, copper and zinc mines. In addition, zinc smelters in China are increasingly capable of processing silver from zinc concentrates, providing upside risk to supply expectations. Meanwhile, still the industrial demand for silver remains at relatively low levels.

However after more than 3 years of a brutal correction and subsequent consolidation, we believe silver is set to rise in 2015. We expect the Silver spot price to increase by more than 30% to $22 per ounce in late 2015

Silver Investment Thesis

Overall, the price of silver is determined by the available supply versus fabrication demand. In recent years, fabrication demand has greatly outpaced mine production forcing market participants to use existing stocks to meet demand. As these available sources continue to decline, silver’s fundamental value continues to strengthen.

However, because silver is a tangible asset, and is recognized as a store of value, its price can also be affected by factors like inflation (real or perceived), changing values of paper currencies, and fluctuations in deficits and interest rates. One of the most noteworthy things about silver in 2014 has been investor sentiment. Investors insist on staying exposed to the metal despite its price weakness.

An example of this is the iShares Silver Trust (NYSE: SLV), the largest silver exchange-traded fund (ETF). In September, after a recent surge in holdings, SLV’s outstanding shares leapt ahead of those of the largest U.S. gold ETF, the SPDR Gold Trust (NYSE: GLD), by the widest margin ever.

In November, retail investors pushed SLV’s holdings up to 345 million ounces, the most in more than three years, according to The Wall Street Journal. That means investors like to buy and hold their silver. They’re very willing to hang onto both their physical holdings and ETF shares.