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Silver Outlook 2014 – Expect More Tarnish

Silver, silver ETFs, and silver miners aren't looking healthy headed into next year

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If you thought your gold stocks were miserable performers in 2013, you can at least take some solace in the fact that silver’s performance was even worse. While the SPDR Gold Shares (GLD) are in the hole 27% year-to-date, the iShares Silver Trust (SLV) is down 33% since the end of calendar 2012. Silver prices fell from $30.38 per ounce to the current value of $20.36 per ounce.

silver-outlookIt was even worse for the miners. Hecla Mining (HL) has tumbled 51% for the year so far, as has the Global X Silver Miners ETF (SIL).

What gives? And more importantly, what’s the silver outlook for 2014?

Silver Demand Remains Brisk

Considering the extreme plunge in silver prices this year (following the equally-extreme increase in price over the course of 2010 and the first half of 2011), you’d think demand for silver swelled and then imploded … as it did for gold.

That’s not how things are, however. The reality — at least, according to Thomson Reuters Gold Fields Mineral Services — is that silver consumption/fabrication is going to improve by 4% this year, to roughly 880 million ounces.

It’s not like there’s one particular aspect of consumption that’s wildly out of whack and deflating prices either. Jewelry designers, technology producers, silverware stampers, coin minters, and medal makers are all on pace to use more of the stuff in 2013 than they did in 2012.

Ditto for silver ETFs and other investment vehicles. Demand for silver as an investment this year is on track to be roughly 14% stronger than last year’s total demand. As of the end of October, silver owned by investors via silver ETFs was at a near-record 655 million ounces, up by 25 million ounces at the end of 2012.

Silver demand, by purpose

The only industry that’s going to use less this year, in fact, is the photography industry — largely thanks to the ongoing growth of personal photo printers. Even then, though, photographic-based demand for silver is only going to slip by about 3.0% in 2013, which will be more than offset by rising demand in other areas.

So if it’s not the supply and demand dynamic that’s sapping prices, then what could possibly be driving silver (back) into the ground? One word … gold.

Article printed from InvestorPlace Media,

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