CPM Group: Lower Prices And The Potential Bull Trap

CPM Group: Lower Prices and the Potential Bull Trap

CPM Group has made some assessments about the silver market that many investors will not like. The firm recently updated its Silver Long-Term Outlook, which gazes out to 2022, presenting an argument for weaker silver prices over that period. The firm also released a report that suggests many investors may currently be at risk of getting caught in a bull trap.

Silver has been trending lower since April 2011, when “hype” pushed prices to $49, according to CPM Group. Prices plunged the following month and have traded between $26 and $36 since September 2011.

Recently, silver has not performed as many market participants insist that it should. The strong price action that is supposed to be seen at times of heightened economic risk has often failed to materialize. But some market observers continue to hypothesize that silver prices will head higher, CPM Group's report states.

Long-term silver outlook

Silver investors were net sellers for well over a decade. CPM Group notes that since 2006, economic and financial crises have fueled interest and investors have been net buyers.

“The single most important question facing future silver prices is how much silver investors will want to buy going forward — or whether they might revert to long-term selling as they did only a few years ago,” the firm said.

CPM Group claims to have identified several emerging trends in the market that could result in wobbly investment demand over the next decade and may weigh on prices going forward. Using this information, the firm makes a case for lower silver prices over the next decade.

Its assessment points to developments that have reduced silver demand over the past decade, including higher silver prices and technological advancements such as digital imaging and smaller electronic components. There is also the possibility that a substantial amount of silver mine production capacity may be added over the next 10 years.