Silver price forecast: analysts predict continued uptrend

The silver price is down 3.2% after having reached its highest level since April 2013. Analysts are optimistic that it will rise again in the medium-term amid low-rates environment and market volatility.

‘Indicators flashing green’ for the silver price despite recent drop

Having reached a seven-year high last night at $26.21, with a 24.3% gain in five sessions amid a new historical record for gold, the silver price is losing ground, down 3.2% at $23.81.

Yet analysts believe the silver price uptrend remains in place. ‘From a technical standpoint, all of silver’s main indicators are flashing green and combined with a trending average directional movement index (ADX)’, considers Monte Safieddine, Dubai-based market analyst at IG.

‘However […] the overview (as with gold) has been labelled volatile. This means conformist technical overview strategies are for expectations for key levels to break and not hold, as market-makers withdraw liquidity fearing getting caught on the opposite side of a fierce move’ he warns.

Despite the significant volatility that the precious metal market is currently experiencing, the silver price should keep its bullish trend within the next months as more expansionary fiscal and monetary policies will keep real yields very low.

Precious metals expect to benefit during times of uncertainty

According to Christopher Vecchio, senior strategist at Daily FX, ‘an environment [of] falling real yields […] historically has been beneficial to precious metals like silver prices.’

‘This backdrop appears to be strengthening: short-term rates are stuck near zero while growth and inflation rates are rising among developed economies in Asia, Europe, and South America’, he explained in an analysis published last week.

Christopher Vecchio also pointed out that in these times of uncertainty, ‘while other asset classes don’t like increased volatility (signalling greater uncertainty around cash flow, dividends, coupon payments, etc.), precious metals tend to benefit from periods of higher volatility as uncertainty increases silver’s safe haven appeal.’

What about views that the silver price could plateau before year-end?

While the majority of analysts are sharing a bullish sentiment on silver in the long-term, some expect the silver price to decline before year-end.

‘We foresee prices to rise during August and then plateau or maybe decline a bit during the September to November period, with higher prices next year’, told CPM Group’s managing partner Jeffrey Christian to Investing News Network last week.

As industrial demand for silver has been a bit slower than the silver mine production to recover, ‘there is some bearishness hanging over the physical silver market’, he said.

The Silver Institute is more optimistic; director Michael DiRienzo anticipates a return of industrial demand from this year. ‘As the economies get rolling again […] the need for silver and gold industrial metal will be even more important’.

Citi analysts expect the gold/silver ratio to fall to 70:1

Therefore, DiRienzo considers that the silver price will rise and continue to reduce its gap with the gold price in late 2020.

Citi analysts share the same stance, predicting the gold/silver ratio to fall to 70:1 in six to twelve months.

The gold/silver ratio is around 80 today as the silver price is trading under $24 and the gold price is at $1935 an ounce.

After a strong fall in March, when the gold/silver ratio breached 126:1, the white metal rebounded in April. It accelerated its rise these past four weeks increasing by more than 24%, faster than the gold price which was up 9% over this period.

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