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HSBC Looks For Range-Bound Silver In 2014; Leaves Forecast At $20.80

By Kitco News
Thursday March 13, 2014 7:46 AM

(Kitco News) - HSBC looks for silver to be “steady and range-bound,” leaving its average price forecast for 2014 unchanged at $20.80 an ounce.

Increasing supply is likely to constrain rallies this year, with mine output and scrap supply rising, said HSBC in a report released late Wednesday. The bank described exchange-traded-fund demand for silver as modest but steady. Meanwhile, greater jewelry, industrial, coin, bar and Chinese import demand will buoy prices, the bank said.

HSBC said it looks for the metal to trade in a range of $17.75 to $22.75 an ounce in 2014. The 2015 average forecast was left at $20.25, while 2016 was left at $21.50 and the “long-term” forecast was put at $25.

The bank looks for mine supply to rise to 832 million ounces this year from an estimated 815 million in 2013, while silver scrap supplies are seen increasing to 249 million from 234 million.

“Prices are close to – but still above – the high end of marginal costs of
production,” HSBC said. “This notwithstanding, silver is still worth
extracting and recycled silver supply is increasing.”

However, the bank lists four sources of demand growth that will help support prices on any downswing – industrial, coin and bar purchases, jewelry demand and increased buying from China.

“Greater industrial silver consumption is a key component in our analysis for steady prices this year,” the bank said. “HSBC economic forecasts, along with the wide-ranging uses for silver, including traditional heavy industries and emerging technologies, imply strong industrial demand for silver this year.”

Industrial and decorative demand is seen rising to 486 million ounces from 475 million last year, the bank said. Jewelry and silverware buying is seen rising to 251 million from 241 million, while demand for official coins and metals is seen up to 122 million from 110 million.

Investment demand is making a modest recovery, the bank said.

“Net long positions on the Comex are rebuilding after steep declines in
2013,” HSBC said. “Silver ETFs have remained remarkably solid despite price
falls and heavy liquidation in the gold ETFs (in 2013). We look for modest increases in ETF demand this year, but the rate of increase will be well below historical averages.”

The bank forecast ETF demand rising by 30 million ounces after a rise of 25 million last year.

By Allen Sykora of Kitco News; asykora@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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