My 2012 Silver Forecast

Silver had quite a ride in 2011

Before I start my 2012 silver forecast, I would like to do a review of 2011. Silver started 2011 at nearly $31.50 an ounce. By near the end of January, it had dropped to just under $27.00. At that point, silver began a huge move upward in price to almost $50.00 by the end of April. Twice, silver tried breaking through the key resistance level of $50.00, but could not do so.

In early May, silver experienced a precipitous drop in price, from a high of just over $47.00, all the way down to $32.70. From that point, silver made its way up to $44.27, when we gotnear the end of August. Silver can be very volatile at times.

Near the end of September, in a matter of days, there was another precipitous drop in price from about $40.00, down to about $26.00 an ounce. Silver tested the $26.00 support level again on December 29, and bounced back to nearly $28.50 on December 30. Silver closed out 2011 at just under $28.00. Now, on to my 2012 silver forecast.

Fundamentals are mildly positive for silver in 2012

Demand for silver can be broken down into 3 important categories. This includes industrial, investment, andjewelry, coins, & decor. These 3 areas account for more than 95% of annual silver demand.

The industrial demand for silver could fall some in 2012. This is due to a slow down in the world economy. Jewelry, coins, & decor are expected to remain positive. The big price movements are likely to come from the investment side of the equation. Investors will react to geopolitical issues, which will most likely decide the fate of silver in 2012. This includes the political and economic issues of the Euro-zone nations, and the United States. The global financial system is not looking good. That should gravitate more investment into silver. It will come from exchange traded funds, hedge funds, silver mutual funds, and speculators of all sizes. This is definitely a key factor to consider, when putting together a 2012 silver forecast.

Silver looking for some technical breakouts in 2012

The price of silver opened 2012 just a hair under $28.00 an ounce. It currently sits at $33.75, as of market close on February 3, 2012. Silver is off to a good start in 2012. At this point, it would not surprise me if silver pulled back to around $30.00. This would be a normal and healthy correction, considering the price movement since late last year.

Silver is currently in an up-trend on the daily chart. The weekly chart of silver is in a down-trend, until it can solidly break above the $36.00 level. A major test of resistance after $36.00 will be around the $44.00 level. A close solidly above that price would confirm a breakout. After that comes the biggest test of all, the $50.00 price level. A solid movement past $50.00, and we could be off to the races. At that point, there is no way of knowing how high the price of silver could go.

Based on fundamental, technical, and other pertinent information, I forecast silver to reach a high of $45.00 to $50.00 in 2012.


Gary E Kerkow is a stock and commodities market expert. He is a successful trader and instructor, with over 20 years experience.

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