Gold and Silver Face an Uncertain 2016 as China Meltdown Looms

China, Gold, and Silver

In another case of silver following gold in world markets, both metals essentially stayed parked within a narrow price range amid China’s economic troubles and the upcoming end-of-year financial reports by the U.S. government.

Most metals analysts were expecting both gold and silver to tick upward in the wake of China’s continuing bad news. Just last week, the Asian economic giant revised an already poor growth rate downward, solidifying a dismal year for the world’s second-largest economy.

However, many retailers who buy and sell precious metals are having a hard time keeping inventories at their regular levels due to enthusiastic consumers who are expecting significant price increases after year’s end.

Here’s why so many average investors are still bullish on gold and silver:

  • The U.S. economy is still on shaky ground, with report after report showing a weak job market, slower than expected job growth and an entrenched unemployment rate.
  • Though the dollar has held firm and European stocks are headed upward, trouble spots in the European Union, notably in Greece, are thought to spell problems for early 2016’s economic outlook both in the U.S. and Europe.
  • Gold and silver buyers, especially those on the retail level, view low metal prices as bargains and a way to stock up on a solid long -term investment. On the ground, consumers are clearly thinking that tough times are ahead, which explains why some retail silver buyers are being put on waiting lists for purchases in excess of 100 ounces of silver or 10 ounces of gold.

Not everyone agrees that the safe-haven status of gold and silver will remain at current levels. If the Federal Reserve Bank increases rates at the upcoming Sept. 17 meeting, that would put downward pressure on all precious metals. In addition, slow growth by China could decrease demand for gold, and especially silver, which is closely tied to the automotive market.

Precious metals aficionados have seen this scenario before, which is why long-term investors relish these short-term price fluctuations to the downside. Silver and gold bargain-hunters have been around for decades, and in today’s volatile global economy, most view gold at or near $1,100 per ounce and silver at or near $15 per ounce as spectacular deals.

Most of the world’s metal market experts are waiting for the Fed’s September meeting and wanting to see how China wraps up the calendar year before making definitive projections about gold and silver price projections for 2016 and onward.

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