Silver prices stand little chance of rising sharply in 1991 after collapsing to 14-year lows of less than $4 an ounce this year on depressingly weak demand and high supplies, analysts say.
The bearishness could nail prices down even further next year, they say.Spot silver traded Friday on the New York Commodity Exchange at $4.05 an ounce after crashing last week to $3.93 an ounce, the cheapest since February 1976.
CPM Group Managing Director Jeff Christian believes 1991 "will probably be the cruelest year for silver," expecting prices to dip to $3.75 an ounce in the beginning of the year. He predicts that silver's maximum recovery potential will be to $5.50 an ounce.
Christian said worldwide supplies next year might increase 1 percent above 1990 to about 518 million ounces, which will again overshoot expected usage of 510 million ounces. This year's demand hovered at 505 million ounces.
Silver is one of the few precious metals that continues to gain in supplies despite lower prices.
Mine closings due to the metal's depressed prices will be partially offset by the start-up of new higher grade silver mines, Christian said.
Bear Stearns analyst Bill Byers said the industrial demand prospects for the metal are not bright because of the economic slowdown in large consuming countries. Silver's major uses, for photography and solder, stand to suffer from a recession. The photographic industry consumes about 45 percent of all silver mined in the world.
Byers said silver will also have problems regaining its role as a safe-haven metal in 1991 "without a near catastrophic situation - such as several money center bank failures or U.S. and Japanese insurance failures."
He sees next year's silver prices holding between $3.70 and $4.70 an ounce.
Analysts expect higher prices in the new year, but the odds of reaping a reward for investing in the metal will stay unattractive.
"Owning silver, even at the current seemingly depressed level, still carries 100 percent risk," said Vahid Fathi of Prescott, Ball & Turben, a stock brokerage house.
"What most people remember is the 1982 price of $50 and today's apparent depressed price," Fathi said.
Silver skyrocketed to $50 an ounce in late 1982 when an international financial panic and hyper-inflation encouraged investors, including the Hunt brothers of Texas, to buy heavily.