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Silver Price To Bounce Back Strong Next Year After Lackluster 2017 – Analysts

Silver investors will soon be able to close the book on what can only be described as a dismal year for the grey metal.

According to some analysts, 2017 has been a roller-coaster ride for silver as prices started the year strong on high optimism; the market was coming off a more than 16% move the year before. However, those hopes were dashed by the summer as the price fell to a 1.5 year low.

Silver’s continued underperformance in the precious metals space has pushed the gold-silver ratio to its highest level in more than a year. Kitco.com shows the gold-silver ratio holding at an elevated level of 78.02 points. The historical average for the ratio is around 60 points.

Heading into year end, silver is struggling to hold above the key psychological level of $16 an ounce, up less than 2% since the start of the year. Ahead of 2018, analysts are once again optimistic that renewed industrial demand can push silver out from under gold’s shadow.

“We are finally beginning to see evidence of silver industrial demand picking up with strong global growth, as the impact of both thrifting and substitution appear to fade. Therefore, strong global growth should, in our view, lead silver to outperform gold, as it has in previous expansion phases,” said analysts at Goldman Sachs in a report published Monday.

Goldman sees silver hitting $17.20 an ounce by the end of 2018. The analysts aren’t alone in their bullish outlook for the Grey metal.

Almost all major Canadian banks, including Bank of Montreal (BMO), TD Securities (TDS) and CIBC see silver outperforming gold. In a report in November, TDS said that going long silver was their main trade for 2018, with a target of $20 an ounce.

“Underperforming silver is set to shine as gold improves amid still low real rates, firm demand, weak supply and higher [volatility],” they said.

BMO looks for silver to rise to $19 an ounce in 2018, averaging the year around $17.78 an ounce, with a long-term forecast of $20 an ounce. In a strong silver price environment they said that their top equity pick is Fortuna Silver Mines (NYSE: FSM, TSX: FVI).

Commodity analysts at Commerzbank are expecting silver prices to average $17.25 an ounce next year, with the biggest gains seen by the fourth quarter. They said that they are optimistic on the precious metal because of higher industrial demand and falling supplies.

“Global silver supply is set to stagnate at [1 billion] ounces,” they said.

On the supply side, many analysts are expecting mining companies to cut back their silver production next year as prices remain fairly low.

In a recent interview with Kitco News, Darren Blasutti, CEO of American Silver said that his company is focusing its production on higher-priced zinc and cutting back on silver production.

He added that the company’s plan is to preserve their silver reserves until prices turn around.

“We don’t believe in producing silver without making any money,” he said. “Long term, I’m bullish on silver because there will be less and less silver coming to production.”

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MARKET SUMMARY

INDICES

Name Last Change
DOW 25120.60 0.31%
S&P 500 2753.17 0.75%
NASDAQ 7841.36 0.17%
TSX 16477.40 0.25%
TSX-V 717.58 0.00%

Resource Commodities

Name Last Change
Gold 1215.60 0.96%
Silver 15.27 1.83%
Copper 2.75 0.010
Platinum 800.12 1.92%
Oil 68.76 0.99%
Natural Gas 2.72 0.70%
Uranium 23.65 0.08%
Zinc 1.17 0.00%

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