This time last year, silver market watchers were hopefully predicting that the white metal’s price might improve by the end of 2015. The metal was changing hands at about $16 per ounce, and some analysts were predicting that in 2015 it would average over $18. 

As those who’ve followed the silver market this year are no doubt aware, those predictions were off the mark. As of the end of November, the silver price was down a whopping 11.73 percent year-to-date, changing hands at just $14.19. And according to Thomson Reuters GFMS, as of November 13, the silver price had averaged only $15.91 for the year.

Take a look at the chart below from Kitco for an overview of silver’s price activity in 2015:

Silver price year-to-date as of November 30, 2015. Image courtesy of Kitco.

Silver price year-to-date as of November 30, 2015. Image courtesy of Kitco.

The question now, of course, is “what went wrong?” To answer that question and to find out what’s in store for 2016, the Investing News Network reached out to silver market participants, including Erica Rannestad, senior analyst at Thomson Reuters GFMS. Read on to find out what they had to say.

2015 themes for silver

Speaking about the silver market in 2015, Rannestad, who recently presented Thomson Reuters GFMS’ “Interim Silver Market Review” in New York, identified three key themes. Here’s a brief overview:

  • Mine production peak — In 2015, silver mine production is expected to come in at 867.2 million ounces, Rannestad said. That’s only a 0.3-percent increase from the previous year, and the slowest rate of growth since 2002, and her firm doesn’t anticipate improvement in the future. In fact, Thomson Reuters GFMS is predicting a decline going forward — “that’s a big theme that’s relevant for 2015 and 2016,” she stated.
  • Record high coin demand — Silver market participants may remember that coin demand was high in 2014, with the US Mint setting a new sales record for American Eagle silver bullion coins. According to Rannestad, that theme continued in 2015, with silver bullion coin sales reaching a new record high of 32.9 million ounces in the third quarter of this year. Buying was driven by low silver prices over the summer, and “resulted in an unprecedented shortage of current-year silver bullion coins among the world’s largest sovereign mints.”
  • Weak Chinese demand — “Chinese demand weakened considerably on the backdrop of a weaker rate of
    [economic] growth,” noted Rannestad. She said that weakness “actually had a pretty significant effect on total physical demand,” adding that “it was the leading driver behind the decline in physical demand overall [in 2015].”
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