As has been the case with some other commodities this year, silver is getting punished. The iShares Silver Trust (NYSEArca: SLV), the largest silver exchange traded fund, is lower by 16% year-to-date, but some market observers believe the metal can bounce back in 2019.
“Next year will be a turnaround year for silver, with prices expected to rally to $17 per ounce by the end of 2019 on higher investor demand and an unexpected end to the U.S. monetary policy tightening, according to Capital Economics,” reports Kitco News.
Potential weakness in global manufacturing has been a particular worrying development for the silver market. While silver is classified as a precious metal, it is still used in a range of industrial applications from electronics to jet-engine manufacturing, which makes the metal sensitive to global economic trends, the Wall Street Journal reported.
Other Factors for Silver
The global economic picture has come into question as an intensifying trade war between the U.S. and China, along with problems in the broader emerging markets, weighed on the silver market and the industrial demand outlook.
“Looking ahead, we think that 2019 will mark a turnaround for the silver price,” Capital Economics senior commodities economist Ross Strachan said on Wednesday. “We expect the price of silver to rise to $17 per ounce by end-2019.”
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A move to $17 an ounce would be a significant increase from silver’s current levels around $13 per ounce. The silver market is in a surplus this year thanks to slack demand, but the market is expected to be more balanced in 2019.
“But, this year’s surplus is a temporary phenomenon, added Strachan, who cited weak investor demand, increased mine production, and slowing photovoltaic demand as the three main reasons behind the surplus,” according to Kitco.
Investors have added nearly $82 million to SLV this year.
Looking ahead, silver and other precious metals may continue to face an uphill struggle as the Federal Reserve is expected to keep hiking interest rates, which makes non-yielding assets like commodities less attractive.
For more information on the silver market, visit our silver category.