Home > Dinar dan Dirham, Gold, Precious Metals, Silver > Silver price predictions – silver prices forecast 2010, 2011

Silver price predictions – silver prices forecast 2010, 2011

You have to plan ahead to stay ahead. Many sliver price predictions are quite daring. Many insiders forecast silver prices literally going through the roof, soaring in relative terms in the end of 2010 and beginning of 2011, just as they did in the 1970s. Of course, you have heard such prediction before, but the facts and fundamentals remain solidly in place for silver as it remains very undervalued on an historical basis, and is undervalued even against gold. Meanwhile gold has been getting plenty of attention from retail investors, thanks to a concerted push by everyone on TV, Talk Radio and Internet. Even Yahoo! Finance now shows gold prices under Market Summary on its front page. Yet silver remains obscure, the preserve of relatively few contrarian investors with the media and financial press barely covering it. That is why the only response bullish silver price predictions elicit is total disbelief expressed by light facial shock with eyes rolling sky high. All it is now when the silver prices are sitting in the intermediate stage of a bull market that will rival or surpass that of the 1970s.

Silver today is worth less than $17.75 per ounce and was at $20.88 per ounce in March 2008. After an 18 month period of correction and consolidation, silver price looks set to challenge that high in the coming months. Our predictions continue to be bullish on gold (see Gold Price Direction – Gold Prices Forecast 2009 – 2010), and we firmly believe that silver will likely outperform gold and quite substantially. In fact our silver prices forecast for 2010 and 2011 is such that silver will exceed its non inflation adjusted high of $48.70 per ounce and its price can reach $55 to $65 range in the coming years.

Why silver is in a bull market and what is the highest price prediction?
In recent years, gold and silver have outperformed equities and real estate. Due to the very bullish fundamentals, this trend is set to continue in the coming months. The forecast for silver prices in 2010 and 2011 is based on:
– the increasing global macroeconomic, currency and geopolitical risks
– silver historic role as money and a store of value
– the ever declining and very small remaining silver deposits
– significant industrial demand
– significant and growing investment demand

Gold, oil, potash, and other major commodities went over their record highs in recent years because of growing demand and short supply, geopolitical risks and concerns regarding the emergence of inflation and stagflation – all pointing to higher silver prices in the long term.

Silver rose from under $1.50 per ounce in 1970 to nearly $50 in 1980, increasing by some 2,400%. Were silver to replicate that, it would have to rise from $4.37 per ounce in 2001 to $110 per ounce. Such seemingly outlandish silver price predictions make many people laugh, but the silver record high in 1980 adjusted for inflation, according to the US government inflation figures, was around $130 per ounce.

Silver prices forecast considers dwindling supplies
According to commodities-research CPM Group, there were close to 2.2 billion ounces of silver in the world. While it may sound huge, the number of ounces stood at 12 billions in 1900. Today, there is less than 1 billion ounces of above ground refined silver. More than 90% of all the silver that has ever been mined, has been consumed by the global photography, technology, medical, defense and electronic industries.

While the birth of digital photography certainly diminished use of silver in the photo industry, based on current and projected supply and demand trends, the amount of above ground refined silver is to shrink to even lower levels in the coming years as demand has been outstripping mining supply for most of the last 20 years, driving above ground supply to historically low levels. However few in the investment world and almost nobody in retail are aware of this important fact.

Why silver price has not gone up? We do not believe in conspiracy theories. The increased demand has been met by silver ounces from inventories and official government stockpiles, which today are getting close to depletion. Those include U.S., China, Russia and India reserves. Now 80% of silver has been mined as a byproduct of other base metals such as copper, nickel, zinc and lead. In the event of a global stagflationary or deflationary slowdown, you can not expect these base metal miners to increase production for the sake of silver as demand for their core product would likely fall, thus further decreasing the supply of mined silver.

There are only a few pure silver mines remaining, all with depleting reserves. This inflexible supply means that we cannot expect significant mine supply to depress the price rise. All these facts comprise a powerfully bullish picture which is unique to silver.

Increasing industrial demand is bullish for silver
Silver today is used more than ever in traditional applications such as mirrors, batteries, medical devices and electrical appliances as well as more recent ones like cell phones, flat-screen televisions, laptops and other modern high tech devices. Increasingly, silver antimicrobial and antibacterial qualities are being used in many types of medical applications. There are many ongoing research projects on the use of silver based compounds for therapeutic and antibacterial purposes. Increasing industrial demand and application for silver forecast higher prices due to economic growth in China, India, Vietnam, and Brazil. Their growing middle classes are now demanding the quality of life and standard of living enjoyed by many in the West and thus the demand for silver will likely increase.

An important side note – unlike gold, silver is not recycled because of its much lower value. So silver is in a way like oil – as it is consumed and used, it’s gone forever.

Increasing investment demand
With the recent hiatus in real estate and stock market and with gold being very expensive, predictions of increasing investing demand for silver are coming to fruition. There has been a marked increase in investment demand for silver in recent years. The introduction of ETFs that track the price of silver, a new global liquidity bubble, the significant growth in the global money supply, the proliferation of wealthy people, hedge funds and the exponential growth in derivatives. In 2003, Warren Buffet called the latter financial weapons of mass destruction.
Investors in silver bullion coins and bars are hedging themselves against further deflation and falls in property and equity markets. They are further protecting themselves against rising inflation, possible currency devaluations and still very prevalent geopolitical and macroeconomic risks such as those posed by the humongous global derivatives market.

Silver is very undervalued comparing to gold
Silver has gotten grossly undervalued versus gold with the gold-to-silver per ounce ratio at 62:1 ($1,105 / $17.75), which goes against a long term historical basis with average gold-to-silver ratio of 15:1. It has bee estimated that geologically there are some 15 pieces of silver for every one piece of gold. In 1980, this ratio was 17 ($850 / $50) for a short time while the average in the 20th century has been around 40:1. So if the ratio gets close to 40 at today gold prices, the silver price should be around $27.50 ($1,100 / 40).

So silver price predictions for 2010 and 2011 are based on the facts that this is a unique metal in terms of being both a monetary and an industrial metal. Silver is priced at less than $17/oz today. The average nominal price of silver in 1979 and 1980 was $21.80 per ounce and $16.39 per ounce respectively. In today’s dollars and adjusted for inflation that would equate to an inflation adjusted average price of some $60 per ounce and $44 per ounce in 1979 and 1980. Add to this the rising gold prices, geopolitical complications, ever decreasing value of paper money and dwindling supplies, the seemingly insane silver prices forecast does not sound that crazy anymore.

  1. 29/09/2011 at 6:17 am

    Great Articles, I enjoy reading your blogs, Whats you prediction for gold?


    Don Memon

    • 29/09/2011 at 4:29 pm

      Gold will soar of course. Although Operation Twist gave USD some energy but their fundamental is still weak and not improving. Seems cosmetic to me. Once there are news that bad to USD, it will drop again, and gold will raise as consequences. I bet 2000 USD/g price is possible this year.

  1. 24/02/2012 at 5:04 am

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