Commodities have been crushed throughout 2015. This is particularly true for precious metals such as silver. In fact, silver has suffered a sustained downtrend since hitting its highs in April 2011 due to strengthening U.S. economic growth and the rising U.S. dollar. Also contributing to weakness in silver prices is the prospect of slowing economic growth in the emerging markets, which previously had high demand for precious metals and commodities.

At first glance, investors may view these declines as an opportunity to buy low. However, at this point, there don’t seem to be many compelling reasons to think silver will rally going forward, particularly if interest rates begin to rise later this year.

The iShares Silver Trust (SLV), which seeks to reflect the performance of the price of silver, receives silver that is deposited with it in exchange for the creation of shares. As a result, it is widely viewed as a good proxy for the actual metal. Unfortunately, the SLV exchange-traded fund has produced very poor returns for investors over a multi-year time frame. This silver ETF has lost 25% per year over the past three years, reflecting the steep drop in silver prices over that time frame.

Usually, precious metals need an inflationary environment to perform well. That is because in times of inflation currencies typically lose value, which lifts asset prices. That is particularly true for precious metals, which are often viewed as a store of value in times of economic distress. However, interest rates play a key role in currency movements, and there is little reason to believe a silver rally is in store.

The U.S. Federal Reserve recently postponed its plans to raise interest rates for the first time since 2006. This has caused a minor reprieve in the silver sell-off. However, that rally may prove short-lived. The Federal Reserve has signaled its intention to raise rates in a matter of months, perhaps even by the end of this year.

That would likely be bearish for precious metals like silver. Rising interest rates would probably cause the U.S. dollar to continue rallying against foreign currencies as higher interest rates are usually seen as a signal of economic strength. Since the U.S. dollar and the price of silver trade inversely, this may result in a further decline for the price of silver.

With inflation not being a real concern, and the prospect of the U.S. Federal Reserve ending its zero interest rate policy, there doesn’t seem to be a compelling case to invest in precious metals, including silver. Demand for silver coins is at levels not yet seen this year as value investors have begun to step in and buy. This has actually resulted in a shortage of silver coins. However, that does not mean the price of the silver metal itself is about to increase.

In light of all this, investors may want to prepare themselves for continued declines in the price of silver. This is particularly so if the U.S. Federal Reserve raises interest rates amid strengthening U.S. economic growth this year.

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