The iShares Silver Trust (NYSEArca: SLV) and the ETFS Physical Silver Shares (NYSEArca: SIVR) have struggled this year thanks to the stronger dollar and speculation the Federal Reserve will soon increase interest rates. Those struggles might not be over.
Barclays analysts project silver prices will continue to decline 20% in the coming year. Last month “HSBC lowered its 2015 silver price forecast to $15.60 from $17.05 per ounce and its 2016 forecast to $16.90 from $18.25. It lowered its 2015 forecast for platinum to $1,126 from $1,170 per ounce and its 2016 forecast to $1,235 from $1,350. The bank reiterated that it expects gold prices to bounce back to $1,205 per ounce by the end of the year on emerging market buying,” according to the Economic Times.
Investors have previously turned to silver exchange traded funds as an asset with a safe store of value and as a metal with wide industrial application in a growing economy. However, the precious metal is now suffering from a bad turn on both fronts.
Additionally, unlike gold, silver is used in many industrial applications, but industrial demand is diminishing as global growth, notably China, begins to slow. Industrial demand for silver dipped 0.5% last year on lower demand from Europe and North America.
“We believe that price expectations for gold and silver are too bullish,” says Robin Bhar at French investment and bullion bank Societe Generale, writing about the recent London Bullion Market Association’s precious metals conference in Vienna, and the LBMA attendees’ average price forecasts of $1159 and $18 per ounce for gold and silver one year from now,” reports Bullion Vault.
Consequently, those who have a strong conviction that silver prices will continue to dip can utilize inverse silver ETF options to play the fall. More aggressive traders can take a look at the VelocityShares 3x Inverse Silver ETN (NYSEArca: DSLV), which takes the -300% performance of silver, and the ProShares UltraShort Silver (NYSEArca: ZSL), which takes the -200% performance of silver price movements.
“SocGen’s poor outlook for silver ‘[is]compounded by the unresponsive of mine supply and the fact that industrial demand will barely benefit from the much lower prices,’” reports Bullion Vault.
iShares Silver Trust
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.