In 2018, silver as an investment in the precious metals sector was among the biggest disappointments mainly because of its steep plunge in price. Many investors even expressed deep concerns about silver being a good investment in 2019 considering that its price plunged nearly 14% last year, a crash that hasn’t been seen since 2015 when the price of silver plunged to under $14.
According to analysts and investors, the plunge of silver prices can be attributed to consistent interest hikes, the increase of the value of the US dollar, and geopolitical concerns. In mid-December 2018, for example, silver was trading at a dismal $14.68 (all dollar figures are in US dollars).
This turn of events leads us to ask several questions: Is silver a good investment in 2019? What are the key factors that investors should look out for in 2019 when considering silver investments? Why invest in silver in the first place?
Volatile Price Performance in 2018
Gold and silver are considered as sister metal in many ways and, unfortunately, their volatile price performance in 2018 reflected it. Since January 2018, the price of silver has been dropping down against the consistent rally of the US dollar. Think of it this way: A man’s gain is another man’s loss and so it is with silver and its relationship to the dollar.
But it was also in January 2018 that the price of silver reached its annual peak at $17.54 just after US Treasury Secretary Steven Mnuchin stated that he favored a weaker currency. Subsequently, the US dollar plunged and the silver price rose; the former, in fact, hit a three-year low, yet another proof of the relativeness of gain and loss.
And then September 11 came when silver hit its lowest price of under $14, the lowest decrease it has seen in 2½ years. No, it wasn’t about the World Trade Center bombing anniversary as it’s a simplistic explanation. The primary reason for the plunge is basic – the selling pressure was more than the buying pressure with plenty of people having given up on silver as an investment.
For a few months in 2018, many dealers even bought back more than they sold. It seemed then that people gave up and capitulated on the silver market and that’s when things hit rock bottom.
There’s also the fact that silver and gold being sister metals, where gold goes, silver tends to follow. But silver being more volatile than gold, it will likely plunge deeper. With gold prices dipping as the US dollar became stronger in 2018, so did silver.
But it wasn’t all doom and gloom for the silver market in 2018. In fact, some market participants predicted that 2018 would be a positive year, price-wise, for silver. Some even believed that silver could outperform gold.
But it wasn’t to be so. Yet another reason for the dip of silver was the surplus market brought by the recovery of mining production. There was also the shrinking demand for silver in sectors that traditionally used the white metal for its products. These included coins, bars and jewelry.
Key Factors in Silver’s 2019 Outlook
With that in mind, we have to think about the outlook for silver in 2019, an important matter if you’re considering investments in it or you already have a stake in it. While nothing’s for certain, we have made a few predictions for the performance of silver this year.
First, an increase in silver prices may be possible due to the increasing demand from the automotive and electronic industries. The demand will likely remain robust and, in turn, it can support an increase in silver prices.
While 2018 was about the disappointment and the subsequent disinterest of investors in silver, 2019 may yet see a reverse in the trend. Many investors may see that there’s a merit in the familiarity of silver in particular and in precious metals in general.
Geopolitical factors will also play a significant role in the increase in silver prices. The global trade climate appears to be becoming better, especially the trade relations between the United States and China, although there may be hiccups along the way.
The hiccups can come in many forms. There are risks, for example, of an increase in global trade tensions especially between the two economic giants, as well as the possible slower growth of the Chinese economy and higher global interest rates.
In China, furthermore, its government has passed legislation that decreases solar panel subsidies that will consequently reduce silver’s demand. There may be a moderate shakeup in silver prices and it’s something that may well worry investors.
The bottom line: Silver has its risks as an investment but then again, this can also be said of investments in other precious metals like gold and platinum. You just have to determine the level of risk that you can take in relation to the rewards that you expect.