Is The Timing Right In The Silver Market?

Tuesday, April 19, 2016

You could buy an ounce of silver for $48.70 in early 2011. The price may seem exorbitant now - with silver at about $16 or $17. However, with silver climbing every day, the notion of silver more than doubling its price and hitting new highs doesn’t sound so silly anymore. Given the strong year gold has had thus far and increasing doubts over global monetary policy, precious metal investors have to ask themselves: is now the perfect opportunity to buy silver while it’s still relatively cheap?

Anyone experienced in investing will tell you that it’s difficult to time the market. You might short the stock market when it’s poised to go up, and you might buy when it’s at a recent high. You simply never know. And although we have plenty of indications that silver may be headed upward (especially given its low ratio to the price of gold, which is traditionally a price of 1:12 or 1:15), knowing whether or not to time silver right now can be difficult.

So how do we resolve this question is the timing right to buy big into silver?

Silver: A Look At The Past

If you want a glimpse of the future, the first thing you’ll have to do is look at the past. It won’t always tell you exactly where silver is heading, but it will give you some context to understand whether your investment may be undervalued or not.

In the case of silver, we can head over to SilverPrice.org and check out their historical measured prices of silver. There we see some important milestones, including when silver nearly touched $50 an ounce in early 2011 and settled back to its current prices in about 2014. Since then, silver has barely budged, neither very far upward or downward, and, in fact, may have found a bottom from which it is only now recovering.

If this is the case, then silver is indeed an undervalued investment right now. Pair that history with the traditional ratio of gold to silver prices and you see that the bright metal has some ground to make up. But that’s no guarantee of future success. What are some glimpses into the future we might use now to see if the timing is right?

Crucial Factors In Silver Prices

Here are some of the most important factors that have a say in the silver market:

  • Supply and demand. This is true of any commodity, but it always bears mentioning. Investopedia notes that the availability of silver, in particular, is something to watch.
  • Economic news. Silver, like gold, is seen as a hedge against inflation. Gold is typically the more “efficient” method of investing large sums of money to avoid exposure to the dollar, but that doesn’t eliminate silver’s value in this regard.
  • Demand for electronics and technology including solar panels will have an effect on the demand for silver itself. Other technology like film photography also has an effect.

If you believe in silver, then you can probably take one look at silver’s current price and declare it a bargain. But if you’re just now starting to wonder if silver might be the right investment for you, it’s okay to step back and think about all of the factors before you make your move. 

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.