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Silver Plays Catch-Up To Gold, 2016 Could be "Pivotal" Year: CPM Group

(Kitco News) - This could be a pivotal year for silver prices, this according to one research firm which launched its coveted silver year book on Tuesday.

New York based research firm, CPM Group’s Silver Yearbook 2016, suggests that silver prices may see stronger support as fundamentals seem to be lined up in the metal’s favor.  “Prices are forecast to benefit from slowing mine supply, modestly rising fabrication demand, and ongoing strength in investment demand,” the firm stated.

However, silver’s rally could be limited in the near-term as CPM Group expects the metal to trade in a range between $14.60 and $18 for the year.

The price of silver has rallied over the last few weeks. Gold is now around 75 times that of silver, down from 83 times higher back in March. Typically silver prices track gold prices, but the past year has seen an unusual pattern, with silver trailing behind gold. But things are now turning around for silver; the metal is up 22% since the start of the year and currently trading at 16.940 an ounce.

CPM’s yearbook said that silver market investors remained net buyers of historically large volumes of the metal in 2015 and are expected to continue showing up this year. “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,” they said, adding that silver coin sales in the United States, Canada, and Australia are reaching record high levels.

The firm stressed that for silver investment demand to find solid support, the metal will need help from both short and long-term investors. “[I]t 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 said.

The firm’s findings suggest that silver mine supply is forecast to decline for the first time since 2011, mainly due to scheduled closures and planned production cutbacks. 

“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 byproduct mines,” the firm said.

They add that 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’s yearbook said.

Silver, known for its industrial component and use in fabricated products has been rising in a slow but steady pattern, CPM said, “reflecting the relatively slow but steady pace of economic expansion globally since the Great Recession.” This year, CPM is forecasting fabrication demand to continue rising, but at a slower pace than in recent years.

CPM Group is an independent commodities research, specialized in providing research for the metals and mining space.

By Daniela Cambone of Kitco News; dcambone@kitco.com

 

 

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