Is now the right time to jump on the silver bandwagon? (Part 1 of 3)
After rising nearly 12% from its June lows, silver has been garnering some attention lately, leaving many investors wondering whether they should raise their allocations to the precious metal. Russ explains why now probably isn’t the best time to allocate more to either silver or gold.
After rising nearly 12% from its June lows, silver (SLV) has been garnering some attention in recent weeks, as investors and market watchers look for something to get excited about amid the broader market’s low volatility and slow grind higher. It’s no wonder, then, that many are asking whether it’s time to jump on the silver bandwagon.
Market Realist – The graph above shows you the 60-day silver price in USD per ounce. It shows an upward price trend. Silver prices, as tracked by the iShares Silver Trust ETF (SLV), rose 12.5% in June, compared to 6.7% for gold, as tracked by the iShares Gold Trust ETF (IAU). However, year-to-date, gold is still fractionally ahead.
According to recent forecasts from major banks, gold will average $1,209 per ounce this year. The average of individual estimates is a drop of 14.5% from the precious metal’s average price in 2013. The 2013 average had been $1,413 per ounce, according to Deutsche Bank.
Deutsche Bank is the most bearish of the major banks. It’s seeing an average price in 2014 of $1,141 an ounce. Meanwhile, HSBC is the least bearish, at $1,292. The middle ground goes to Barclays, which predicts an average price this year of $1,205 per ounce for gold.
A Bank of America Merrill Lynch strategist said a lack of buyer interest is his biggest concern. Analysts have said that a stronger global economy, continued tapering of the Federal Reserve’s bond buying, and no sign of inflation could also pull interest away from gold.
My take: Despite the precious metal’s recent rally and though silver (SLV) may be somewhat more interesting than gold (IAU), I’m not convinced that this is a market that most investors want to chase.
Browse this series on Market Realist:
- Part 2 - Must-know facts about the silver rally
- Part 3 - Should you invest in silver and gold stocks or ETFs?
- Basic Materials Industry
- Commodity Markets