Silver price forecast to rise 37 per cent by end of 2016

Capital Economics says price of silver set to outperform gold

Silver price forecast to rise 37 per cent by end of 2016

Macroeconomic consultancy Capital Economics has forecast that silver will outperform gold, rising to a high of $25 an ounce by the end of 2016.

In a note issued on January 23, Julian Jessop, head of commodities research said: “We are raising our forecasts for silver from $20 to $23 per ounce for end-2015 and from $23 to $25 for end-2016. This implies a gain of around 25% and 37%, respectively from today’s level of just above $18.”

Silver has performed poorly since early 2011 when it hit $50. In the note Jessop explained :“The ratio of the price of an ounce of gold to that of silver is now 71 ($1,300/$18.3), compared to a long-run average of around 60.”

Reasons for fall

Jessop argued that the two reasons for this fall were:

The price of silver is traditionally more volatile than gold. “As a result, silver has tended to out-perform gold when the price of both are rising, but to under-perfrom when both are falling.
Industrial uses account for over half of silver demand, compared to just 10% for gold. Thus, since 2011 a faltering global economy has impacted silver demand more heavily, particularly in late 2014.

However, he expects both factors to turn into positives this year. “For a start, we are forecasting further gains for the price of gold, to $1,400 by the end of 2015 and $1,470 in 2016,” he said. He also expects the global economy to pick up.

Learn more

If you’d like to learn more about silver and how best to gain exposure to it, read our Guide to Investing in Silver.

 

The writer holds gold ETFs and physical gold and silver.

 

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About Author

Christopher Menon

Every Investor Editor Chris Menon is a financial journalist who has written regularly for national newspapers, magazines and websites about personal finance, with particular emphasis on investing.

  • Mike Trotter

    Come on, you know damn right well, the silver market has been manipulated by the big banks