(Kitco News) - Banks on average are forecasting slightly higher average silver prices for 2014, with the market expected to get some strength from industrial demand, particularly if the U.S. economic outlook improves.
Investment demand is also expected to return to support silver. Yet analysts are keeping their upside forecasts muted for silver gains as the metal is traditionally influenced by gold’s direction. With gold seen struggling next year, silver may also have a cap on prices.
Silver is seen averaging $23.13 in 2014, with a first-quarter average of $20 an ounce giving way to $25 by the third and fourth quarters. Subdued investor buying weighed on silver prices in the latter half of 2013, but the firm does not see much further downside under $20, and it sees “scope for a limited rally.” There’s little reason for investor to come back to the market, which could keep a lid on prices. “At the same time, we believe that a complete collapse in quotations is unlikely, partially because non-commercial market participants may retain some silver in their portfolios, for instance on the view that EMs (emerging markets) should continue to increase their silver purchases structurally in the medium term, despite the current headwinds. We also note that macroeconomics concerns, including liquidity-driven inflationary pressures, make silver an attractive tail-risk hedge,” they said.
Silver prices could trade to $19 by the end of 2014, as growth from catalytic and electronics demand supports the metal.
Citi said it looks for silver to average $20.30 an ounce in 2014. The bank cited “largely inelastic mine supply growth” and mixed fabrication demand. Likewise, silver would also be hurt by expected tapering of U.S. quantitative easing , the bank added.
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Silver prices should average $21.50 in 2014, as the bank sees stronger industrial demand supporting prices, as the global economic recovery should spur use. Investment demand is also forecast to be strong, too, supported by low prices in both U.S. dollars and relative to gold. The bank is upbeat on gold prices and thinks the yellow metal will pull along silver.
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Standard Chartered looks for silver to average $23 in 2016, with prices mostly range-bound. Higher real interest rates will hurt silver due to the rising opportunity cost.
The Swiss bank lowered their 2014 silver-price forecast by 18% to $20.50 an ounce, following a reduction in their gold price outlook. In addition to lowering their 2014 silver forecast, UBS downgraded their 2015 price outlook to $21, a 13% reduction, but left 2016 at $25 and 2017 at $24.20.
By Debbie Carlson of Kitco News; firstname.lastname@example.org