Three Reasons To Be Bullish Silver, May Outperform Gold in 2016: Capital Economics
New York (Jan 8) It’s been all about gold as of late, but one U.K.-based research firm shifts focus onto silver, which it expects to have a positive year ahead.
After having struggled throughout 2015, and losing over 12% on the year, Capital Economics’ commodities economist listed reasons to be positive silver this year, so much so that it may even top gold.
“While we acknowledge that U.S. monetary policy and the dollar will play a central role in determining the direction of prices, we expect silver to stage a partial recovery this year, outperforming gold slightly, for three key reasons,” said Simona Gambarini in a research note Friday.
For one, the analysts said that they expect gold prices to recover to $1,250 by year end, which would support silver prices as well. Gold prices have been off to a good start so far, hitting a two-month high in the first trading week of the year. February comex gold futures were last quoted down $5.50 at $1,109 an ounce. March silver was last down 2.12% at $14.04 an ounce. Silver-Gold-US
The recovery in gold prices will be led mainly by a “revival of demand for inflation hedges and safe havens, and by increased buying from emerging economies,” she said.
“Second, after years of low prices, we expect cuts to capital expenditure across the industrial and precious metal industries to start taking their toll on silver supply, with output expected to fall by 3% in 2016,” she listed as another reason to be optimistic on silver prices.
Finally, Gambarini continued, a recovery in key consuming nations’ economies should revive demand for silver in industrial applications, particularly electronics.
However, she noted that she doesn’t expect higher demand for silver to materialize until the second half of the year.
“That said, we anticipate a much stronger outperformance of silver in 2017, with prices reaching $18 (from around $14 currently). This should bring the gold/silver ratio below 70,” she said.
Despite this upbeat forecast, Gambarini said she remains cautious in that a sustained recovery in silver prices should only occur when sentiment towards emerging markets and industrial metals rebounds.
“[W]e are lowering our end-2016 forecast for silver to $16.50 per ounce, from $20 previously, to give a greater weight to persistent headwinds we expect from tightening U.S. monetary policy and from further dollar strength,” she said.