Silver 2012 predictions: What do you think - bearish or bullish?

By Commodity Online
Previous year has been a very mixed for  Silver  investors. By April it was very bullish for silver which rose 61% compared to the closing level in 2010. Silver suffered a setback in 2011, backtracking from a near-doubling in price during 2010, as worries about the global economy and a recent slide in  Goldhurt demand. This is its first annual loss in three years.

Silver is now however well below the $30 mark and is thus over 10% in the red from its peak. The huge gains in the first 5 months of 2011 were completely erased in 7 months that followed. A significant setback for the silver bull!

So, how does the coming year look like? We must prepare ourselves as silver investors for the next 12 months and expect a similar volatility as we have seen in 2011? Where should you buy or where should you sell?

Most of you would have been bombarded with many 2012 predictions in recent days, with most predictions ranging from as low as $10 to as high as $50. The truth , however, is somewhere in between.

What do you think - bearish or bullish?

Here are some silver predictions for 2012:

David Morgan, publisher of Silver Investor,  still believes silver price will go above $50/oz in 2012. He forecast $65–75/oz silver by the end of 2012.

David Morgan stated, “I don't see the silver price going above the $50/oz level in 2011. In other words, the top is in for this year, and has been for some time. I still believes silver price will go above $50/oz in 2012. I forecast $65–75/oz silver by the end of 2012. I don't foresee a big rush into price appreciation for gold or silver in the first quarter of 2012 (Q112), which is seasonal.”

Eric Sprott, chairman of Sprott Inc. stated,  " I think the price should already be substantially higher, the trade should be 16:1 gold:silver ratio in 2012. That implies that at $1,600/oz gold, silver should be $100/oz. At $3,200/oz gold, silver should be $200/oz. The outlook for gold is phenomenal and silver is going to go up even faster. That is why I think that this next decade will be the decade for silver."

James West, the editor of The Midas Letter and portfolio advisor of the Midas Letter Opportunity Fund,  isn't interested in timing the precious metals market—that's a good way to end up butchering perfectly good investments. He believes  Silver  price is going to be one-sixteenth of the  Gold  price so it's already undervalued by at least two-thirds. Gold and silver are both going to continue to appreciate. Also he agree with Sprott when he says that silver is going to outperform gold in 2012.

Bob Moriarty, founder of 321gold.com,  argues that the Silver Gold ratio over 100 years has been 47:1—47 ounces of silver per ounce of gold. He believes that the ratio could spike to 100:1 during this financial crisis given that historically the ratio has always been higher in such situations.

Alasdair Macleod, Senior Fellow at GoldMoney Foundation,  also expects silver to take some bold leaps in the year upon us. In lieu of a dying fiat currency, Macleaod believes silver and gold will undoubtedly take the reigns as the financial currency of choice as the purchasing power of dollars, euros, pounds, and other currencies wanes.

In these uncertain and changing times, more and more investors will be forced to invest their wealth in safer places. Macleod understands this, saying: “We don’t have very long left to live under fiat money. We’re on an accelerating road to a complete destruction of paper currencies, with only about two and half years left to go. The economic establishment is collapsing. On one hand it’s frightening, and on the other it’s very exciting.”

HSBC Securities has lifted its silver price forecasts for 2012 and 2013 amid expectations  that strong bar and coin investment demand, together with growing interest in silver exchange-traded funds, will push the market higher. It now expects the silver market to average $34 a troy ounce next year, and $32/oz the year after–both of which are a $2/oz increase on HSBC’s earlier forecasts.


“Demand for silver will be sustained by global concerns about fiscal profligacy, political gridlock on dealing with the U.S. budget deficit, long-term sustainability of the U.S. dollar, potential inflationary consequences of highly accommodative monetary policies, and economic uncertainty. Coin and small-bar demand may moderate from current high levels, but remain strong, further contributing to silver price strength,” HSBC added.

Bank of America Merrill Lynch (BofAML)  estimated that there is a good upside potential in 2012  Silver  prices. As per the bank, prices should average $34/oz, followed by $37/oz in 2013, because of continued interest in the metal. 

Silver fundamentals have been improving in recent years for a host of reasons, including increased demand from emerging markets, somewhat reduced drag from the photography sector and higher usage from new applications. This suggests that gradual increases of silver quotations were justified. Use in applications like solar panels should increase going forward. Demand from the photography sector has fallen steadily and scope for further large reductions in off take is limited.

TD Securities  looks for an even greater 9% gain, to 1.021 billion ounces.

Barclays Capital  has bullish outlook for silver in 2102, an increase of 24% to $35 an ounce.

Commodity Online Research  estimated that silver prices may witness moderately bullish trends in 2012 on global macro-economic uncertainties and possible fall in industrial demand for the commodity.

Deutsche Bank  is forecasting $37 for silver in the first quarter, $39 in the second and $44 in the third and fourth quarters.

According to  Professional Numismatists Guild (PNG)  silver in the first quarter varied from $24.35 per ounce to $57.50 with a mean average of $34.04, and from $23 to $130 with the average of $48.73 by the end of 2012.

Six factors would drive the price of silver higher

--There are more (probably much more) than five Billion ounces of  Gold  bullion collecting dust in vaults around the world,  and more is added to the vaults everyday because more is mined than is used as jewelry or industry or investment products.

--There is less (probably much less) than one Billion ounces of silver bullion available for consumption by industry,  and that number is further depleted every day because less is mined than is either consumed by industry or is converted into more valuable investment products.

--Perhaps 70% of the silver currently being mined is a byproduct from base metals mining.  As the world continues to fall into a deeper inflationary depression, the amount of base metals that will be mined will reduce as worldwide construction demand decreases with the slowing economy. That inevitable reduction in base metals mining will further exacerbate the supply deficit in  Silver  relative to the demand.

--The industrial applications that consume silver cannot reasonably substitute other alternatives, so those industries must have silver to continue their business.  The amount of silver used in each product is small, so the use of silver is price inelastic because industry will continue to consume silver even after the price increases substantially from current levels. The real wild card is that all industries have migrated to just in time purchases of the Silver that those industries must have. When news gets out that one industry is having trouble getting delivery on cheap bullion silver, there will be a stampede by all industries to lock in the physical they must have to continue production.

--The Banksters have been artificially depressing the price of silver for decades,  and those criminals continue to squelch price rises in silver by selling huge quantities of paper that is not backed by anything. The investment world is beginning to realize that paper promises have little meaning, and that smart investors need to hold physical. As that migration to physical accelerates, the paper market will become much less relevant and the Banksters will be overrun with demands for physical. The explosion in the price of silver will be so strong that it will even be able to carry its little brother  Gold  to higher prices.


--One silver problem is that buyers get too much metal for their money.  As silver rises, it will not take as much space in secure storage, and big money people will consider putting some of their wealth into silver. That buying by big money will drive the price of silver exponentially higher, as each increase in price makes silver that much easier to store. People who prefer to buy gold because silver is too heavy and bulky will be happy to hear that someday they will be able to get much less silver for their gold, because the price of silver will increase so much more rapidly.

 

Peter Schiff - Gold in 2012

 
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Peter Schiff - Gold In 2012

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