Real negative interest rates will drive silver to all-time highs - Murenbeeld & Associates
(Kitco News) - The silver market has seen some spectacular volatility this year as market expectations shift back and forth between deflation and inflation risks. One market analyst said that silver investors need to be patient as the market could see some significant buying momentum next year.
In an interview with Kitco News, Chantelle Schieven, head of research at Murenbeeld and Associates, said that although silver prices could be caught in a fairly wide range through the rest of 2020, she said that she sees strong potential for silver starting next year.
The comments come as silver prices trade near a three-week high. December silver futures last traded at $25.25 an ounce, up 0.55% on the day.
After being a definitive voice in the gold market for decades, Martin Murenbeeld and his team of researchers bring their analysis and expertise to the silver market as the firm broadens its reach in throughout commodity markets.
Schieven said that she is bullish on silver for the same reason she is bullish on gold: falling real interest rates.
"I think the real interest rates, the tips yields have to go back down," she said. "We're going to see the Fed kick in. We're going to see more fiscal stimulus come our way."
Schieven added that by the Federal Reserve's account, real interest rates have much further to fall. She noted that the Federal Reserve expects to hold interest rates at the zero-bound range through 2023; meanwhile, the central bank also sees interest rates tick higher.
"[The Federal Reserve] is actually showing a real short term yield negative of about 1.6% going forward," she said.
And if interest rates and bond yields do start to creep higher, Schieven said that the central bank would be quick to introduce a yield curve control program. As inflation picks up and the impact of the COVID-19 pandemic starts to weaken, Schieven said that she expects silver to outperform gold.
She added that silver prices could hit all-time highs in the next two to three years.
As for which metal fits into an investor's portfolio, Schieven said that there is a role for both gold and silver.
"If you're really trying to capture some short-term gains over the next two to three years, four years gains, then silver can definitely have a place in there. Holding five to 7% gold in a portfolio all the time is our long-term recommendation," she said.