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.