What Just Happened with Silver Futures

Despite projections of a golden economic future for the precious metals mining sector, gold and silver’s 2013 take off was a jittery one riddled with plunges. The first and second quarters of the year left investors wringing their hands as they watched their stocks tumble. Vanguard Precious metals toppled by 23 % while iShares Silver Trust prices collapsed by 34%. When placed under a magnifying glass, the appearance of precious metal stocks seems to predict a melancholy future.  But when you zoom out to view the full picture, a drastically different image appears if you’re looking to invest in silver. 

Long term trends reveal that silver has lost none of its sheen: a long term rebound pushed its prices up from $5 per ounce in 2000 to $9 six years later. 2006 brought a recovery that was followed by a fluctuating market that is still inclining. When you set September’s boom of $24 an ounce against silver’s gloomiest November days when values of almost $21 were reached, you can be forgiven for wanting to give up your stocks. If you’re a long-game player, on the other hand, you will be grasping all the precious metals you can cater for in preparation for a record boom. The reasons you should consider doing so can be found by digging into the pressures that pushed silver’s stock values down in the first place. 

 Unlike gold, which wins popularity contests because it holds its value sturdily despite its consumption, silver responds skittishly to supply and demand as well as speculation. It has no currency value and, as a by-product of gold, its supply is constant. When April and March declines struck, it was partially in response to the FOMC’s declaration that the economy remained too frail to begin a quantitative easing program for interest rates that are historically low. With the Federal Reserve responding with a plan to reduce assets spending, anxiety levels began to soar. The mass crisis of confidence that followed doomed silver to an almost instant 4% crash, as investors looked forward to a Christmas weighed down by inflation and unemployment. 

Speculation is, however, based on hypotheses that are often unreliable, and November dawned to prove that these predictions were little more than guesswork. Britain’s economy is showing itself to be far more buoyant than the Bank of England expected—a trend that can be spotted in the Americas, too. Projections of recovery will need to be shifted to earlier dates, with silver forecasts being bolder than before. Savvy investors have already begun to invest in silver, which has diminished supply and led to an even wilder flurry of demand. At the same time, the international economy is slowly beginning to find itself on stable ground, which is pushing the industrial demand for silver up to what could potentially be a three year high. Reuters predicts an acceleration in global growth that may end in prices of up to $40 an ounce. 

If you’re more of a long game player, your patience will be rewarded with record highs that are expected to climb to their greatest heights by 2014. If you’re a deep asset investor, you have plenty to gain from precious metals, which will leave bond investors ailing but silver investors swimming in profits. If you’re looking to invest in silver over a month or two, the falling dollar  will probably bring a short term windfall, which is likely to come with end of year prices of $32 an ounce. The precious metals niche is too often ignored, and if there was ever a time to pay attention, it is now. 

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