Thomson Reuters GFMS Silver Outlook for Next Three Months:
Date of Release: 5th April 2013
IMPORTANT NOTE: The following is for informational purposes only and was developed by Thomson Reuters GFMS. It does not take into account the investment objectives, financial situation or particular needs of any particular person. Information is from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Opinions and estimates are the judgment of Thomson Reuters GFMS and are subject to change without notice. Distribution of this information does not constitute agreement with, or an endorsement of, the views expressed. Obviously, future outcomes are impossible to predict with certainty. Investors should obtain advice based on their own individual circumstances and understand the risks before making any investment decisions.
With prices falling to a nine-month low of $26.62/oz on 4th April (on an intra-day basis), silver has remained a weak performer in the precious metals complex. Similar to February, the white metal’s recent poor performance has been partly related to a disappointing gold price, as a lack of imminent inflation pressure in many key countries and growing confidence in the US economy have continued to reduce investor appetite in safe haven assets. In addition, silver has been pushed lower by falling industrial metals prices, with copper, for example, dropping to an eight-month low in early April. This, along with silver’s innate volatility, also helps to explain a rise in the gold:silver ratio since late March, which is now trading above 57, a level last seen in August last year.
Looking ahead, as we expect gold to continue struggling with upwards momentum in the short term, silver therefore is likely to spend much of the time trading below $30 in March and April. Silver will also face a number of headwinds including still softening fabrication demand coupled with an elevated level of silver bullion stocks. With regard to the former, although silver industrial fabrication is set to recover some lost ground in 2013, the recovery year-to-date has proved to be slow, especially in Japan and Europe. Indeed, even allowing a pick-up in re-stocking later in the year, global silver industrial offtake is projected to remain some way short of its peak seen in 2010. For instance, silver demand in photovoltaics, a key driver behind the impressive growth in silver industrial applications over the last decade or so, is likely to struggle with meaningful gains this year, as the industry will continue to face a series of challenges including low Feed-in-Tariffs, over capacity and ongoing pressure from substitution and thrifting. Meanwhile, given the continued strength of mine production and sluggish industrial demand, silver stocks have been growing rapidly in recent months. This is especially evident in silver bullion stocks held at Comex warehouses where total silver deposits rose to 164.2 Moz by end-March, over 10% above that seen at end-2012 and the highest level since late 1997. In China, bullion inventory also seems to have remained high, stocks at SHFE alone amounted to 35.7 Moz by end-March (silver contract was only launched in may 2012), with a far larger amount of silver bullion believed to have been held by producers, smelters and trading houses.
Nevertheless, as mentioned in the gold section, the economic backdrop is still favourable for precious metals investment in the short term. As such, once gold is set to rebound as we progress into the second quarter, silver is likely to follow suit, which could see the white metal rise above the $30/oz threshold at some point in June.
Let us help you:
available now at
Monex Price Charts
For information on
adding our charts
to your website