The price of silver will depend heavily on trends in investment demand in 2018, but could get a boost from international political and economic risk purchases, CPM Group said on Tuesday.
“The enormous range of economic, financial and political issues facing the world and individual investors seems more likely to lead to a rekindling of silver demand from investors,” New York-based CPM Group said in its Silver Yearbook 2018.
Although spot silver prices are currently down about 1.6 percent this year, they often rise in tandem with gold prices in times of global political or economic uncertainty.
Spot silver prices finished up 7.2 percent in 2017, versus 2016. However the average price declined 0.5 percent in 2017. Prices are down roughly 2.5 percent so far this year as investors pursue higher-yielding opportunities, including global equities.
“The fundamental story on silver is stronger than the investment. Retail investment collapsed, but if this turns around, people could come back into it,” said Miguel Perez-Santalla, vice president of Heraeus Precious Metals.
Silver investment demand dropped 52 percent in 2017 to 50.2 million ounces on a net basis. CPM Group expects 43.9 million ounces in investment during 2018, the lowest since 2006 when investors added 30.6 million ounces to holdings.
“On various occasions over the past few years, silver prices have risen only to fall back. This sort of price pattern often turns investors away, putting them in a cautionary, wait and see frame of mind,” CPM Group said. Though geopolitical issues, including looming U.S.-Russia and U.S.-China tensions may stimulate investor safe-haven interest, they may not buy aggressively, the report noted.
Global silver mine production was forecast to rise to 776.6 million ounces in 2018, up 0.2 percent from 2017.
“While there is a lot of silver available in the world, compared to gold, and unlike gold silver tends to be liquidated from inventories more readily, there has been a decline in mine supply since 2016 which is expected to continue over the next decade. Declining mine supply and rising fabrication demand are expected to tighten the market,” CPM Group said, adding this could lead to an increase in prices.
CPM Group expects continued growth in silver used for solar panels, forecasting a 1.2 percent increase at 107.3 million ounces, but not enough to make a significant impact on prices, as in recent years.
Jewelry and silverware demand is expected to rise for the seventh consecutive year to 306.1 million ounces in 2018, 8.9 percent.
Reporting by Renita D. Young Editing by Matthew Lewis and Frances Kerry.