Chart of the week: silver prices set to hit US$21 an ounce

“silver does look under-valued”

Capital Economics bullish on silver price for 2015 and 2016

Chart of the week: silver prices set to hit US$21 an ounce

Chart of the week: silver prices set to hit US$21 an ounce

Capital Economics has forecast that the price of silver will rise to US$21 an ounce by the end of 2016.

In a note out last week, Julian Jessop chief global economist at the macro-economic, consultancy wrote that “silver does look under-valued”.

He explained that while silver closely tracks the price of gold it is like a ‘high beta’ version of gold, tending to climb further when the prices of both are rising and drop further when then are falling. The reason for this being that the silver market is smaller and less liquid.

This year has been no exception, as the chart shows.

gold and silver prices

The current silver price is £9.95 ($15.5) an ounce and in the States, recent falls have led to strong investor demand. Indeed, the US Mint announced on Tuesday it temporarily sold out of its American Eagle silver bullion coins due to a significant increase in demand.

According to Jessop: “Silver decoupled from gold in the second half of last year and, while the two have moved in line again more recently, the gold/silver price ratio is high at 75 (gold $1,165 per ounce, silver $15.5), compared to a long-run average of around 60.”

Still, he thinks it will bounce along with gold: “We are positive on the outlook for most metals from current depressed levels. In particular, we still see gold recovering, to around $1,275 per ounce by the end of this year, and rising further to $1,400 by end-2016. Consistent with this, we have pencilled in a rebound in the silver price to $18.7 per ounce by end-2015 and $21 at end-2016.”

Learn more

If you’re thinking of investing in silver, read our free Guide to Investing in Silver.

The writer is invested in physical silver.

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