Silver Prices in a Deep Slump...Could Revive in 2019

New York (Dec 9)  As a traditional hedge amid volatile markets and geopolitical unrest, gold has gotten a lot of attention in recent months. It just hasn’t translated into much new buying interest. At the same time, palladium prices have created headlines by hitting record highs. Silver prices, meanwhile, quietly sit close to their lowest levels in nearly three years following a 15% decline this year. They deserve a closer look.

But silver has “already attracted some increased investment,” Wiebe says. Data from the U.S. Mint show sales of one-ounce 2018 American Eagle silver bullion coins reached nearly 1.7 million in November, the third highest monthly total so far this year. The mint announced a temporary sellout of the coins in early September.

Based on “the current ratio to gold, silver at present would be a good investment,” says Wiebe. The ratio between the two metals—how many ounces of silver it would take to buy one ounce of gold, currently stands around 85. That’s not far off its November 2018 peak at 86.39, its cheapest point since 1995, says Dunn.

“Silver continues to underperform gold prices,” he says, but it “may be setting up to be a leader this year,” with many of silver’s key drivers still bullish, including rising global manufacturing and industrial production. “Inflationary pressures are also on the rise as evidenced by elevated inflation expectations, rising fiscal spending, and a tighter labor market with rising wages,” says Dunn.

Futures prices for gold have lost more than 4% year to date as of Friday, about a third of the loss for silver. “Compared with prior years, silver retail buyers have been less interested in accumulating [silver], unmotivated in a declining silver price environment,” says Peter Spina, president and chief executive officer of gold and silver news and information provider GoldSeek.com. He points out that the market saw a “big chunk of retail silver investors turn to Bitcoin and crypto [in the] past few years.”

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Despite that big fall in silver prices, “investors would be unwise to be selling at these levels and chasing the next hot market,” Spina says.

He emphasizes, however, that investors should look at silver with at least a one- or two-year investment horizon, and warns that silver may see “one more big liquidation that takes prices closer to $10.” That would be an “ultimate buy,” he says.

“Once fear and problems emerge in the various bubbles we see around the world,” including overvalued equity prices and the hundreds of trillions of dollars in debt that the world is swimming in, “that will eventually cause the next financial crisis,” Spina says. “Silver will be one of the havens.”

“Buying at these prices will look like a no-brainer,” if that scenario does come to pass, he says.

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