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Where is the price of silver headed?

by , 04 April 2014

The price of silver has been ebbing since March last year. It's currently trading below $20. But silver is getting ready to rally. There are several forces at play that look set to drive the price higher. Silver looks set to trade at more than double its current price within two years. Let's take a closer look at the reasons why…

The four basic drivers of the silver price

These are the main drivers of silver, Sean Brodrick in Investment U explains.

#1: Global supply
The majority of silver produced is as a by-product of other metals, such as gold, lead, copper and zinc. The supply of silver should remain steady unless the price falls below $15 per ounce. It looks like the supply will be the same if not more than last year.

#2: Industrial demand
There are forecasts for strong industrial demand of silver. This demand includes that from traditional heavy industries and emerging technologies. But this is all dependent on the global economy. Industrial silver is very sensitive to the economy, like copper.

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#3: Demand from the jewellery industry
This is difficult to predict, but demand will probably be similar to last year.

#4: Investment demand
The demand for silver bars is building. And the demand for silver from silver-backed exchange traded funds remains strong. Recently silver ETF holdings were just off the peak seen in October last year.

Other demand for silver

Sales of US silver coins in the form of Silver Eagles are doing very well. In January, demand for these coins outstripped supply. And the trend continued in February and March.

When you add these factors together, it looks bullish for silver.

And looking at silver on the charts, the metal looks set for a breakout. Have a look at the chart below…

Price of silver

So far this year, silver has bounced between $18.50 and $22.

If you’re looking to invest in silver, you want to buy below $20. Over the course of the year, silver should test resistance at $24.

If silver manages to push above $24.20, it should start to rally higher. The longer silver takes to break through this resistance level, the bigger the breakout will be.

Emerging markets are buying more silver. Industrial uses for the metal are growing. This demand will start to effect prices.

Silver should start to move higher over the next six to twelve months. And within the next two years could be trading around $50 an ounce.

So there you have it, where the price of silver is going.

Where is the price of silver headed?
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