Silver price decline slowing, 2016 may see improvement – CPM
SILVER LINING? Prices may see stronger support as all of silver’s market fundamentals come together to aid silver prices
Silver prices continued to decline for the fourth consecutive year in 2015. However, the pace of decline slowed, relative to the previous two years, states New York-based research and consulting firm CPM Group.
CPM’s current analysis, as outlined in detail in its 217-page 2016 Silver Yearbook, sug- gests that 2016 could be a pivotal year for silver prices.
“Prices may see stronger support as all of silver’s market fundamentals come together to aid silver prices. Prices are forecast to benefit from slowing mine supply, modestly rising fabrication demand and ongoing strength in investment demand,” CPM predicts.
The 2016 Silver Yearbook addresses the evolution of these fundamentals over the past few years and the impact these fundamentals are expected to have on the price of silver over the course of 2016.
CPM says silver mine supply is forecast to decline for the first time in 2016, since 2011. Global silver mine supply is projected to slip lower during 2016, owing to scheduled closures and planned production cutbacks.
The firm points out that major contributors to this forecast decline in silver output include Mexico, Australia, Chile, Guatemala and Russia. Production losses are expected to be a mix of both primary as well as by-product mines.
“Silver scrap supply is forecast to continue weakening in 2016, albeit at a slower pace than in 2015. The combined weakness in mine supply and secondary supply is expected to bring total supply down by 2.1% from 2015.”
CPM highlights that silver use in fabricated products has been rising in “a slow but steady pattern”, reflecting the relatively slow but steady pace of economic expansion globally since the global economic downturn in 2009.
The firm comments that in 2016, fabrication demand is forecast to continue rising, but at a slower pace than in recent years. “Silver use in jewellery and silverware is projected to rise modestly, while silver use in electronics and batteries may be only slightly higher than in 2015. Silver use in solar panels has been a major contributor to demand growth in recent years.”
CPM believes that the strong pace of solar panels installations in China, the US, India and other markets is expected to continue supporting demand for silver from this source.
The firm remarks that silver market investors remained net buyers of historically large volumes of the metal in 2015 and are forecast to remain net buyers during 2016.
CPM says longer-term investors have been the primary buyers of silver in recent years, with shorter-term investors staying on the sidelines or outright building short positions.
The firm adds that longer-term investors have been buyers of large volumes of silver coins with silver coin sales in the US, Canada and Australia reaching record high levels.
“The continued interest in silver, particularly in coin form, is expected to be an important factor supporting silver investment demand at elevated levels. That said, it needs a combination of both longer-term and shorter-term investors to push silver investment demand higher on a sustained basis.
“Shorter-term investors may need some serious jolt to drive them back to the silver market in a meaningful way,” CPM concludes.
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