First Gold...Now UBS Upgrades Silver Price ForecastBy Kitco News
Thursday July 07, 2016 10:23
(Kitco News) - A day after increasing its gold forecast for 2016 and saying the market has entered the early stage of its next bull run, Swiss bank UBS is at it again, increasing its silver forecast more than 4%.
In a report Thursday, Joni Teves, precious metals strategist at UBS, said she is upgrading her average silver price to $16.80 an ounce for the year, an increase from the bank’s previous forecast of 16.10 an ounce. For 2017, Teves expects the precious metal to average $18.30 an ounce, up more than 7.6% from the previous forecast of $17 an ounce.
Although the silver market is off its two-year highs seen at the start of the week, it is still holding onto significant gains. September Comex silver futures last traded at $19.77 an ounce, down more than 2% on the day. However, the market is still up more than 43% since the start of the year.
While Teves is bullish on the grey metal, she admits that it will be a choppy road higher.
“We continue to expect that silver would struggle to consistently outperform gold inasmuch as the main driver is strategic portfolio allocation amid an uncertain macro picture,” she said. “The most conducive scenario for silver, in our view, is if gold stays buoyant while risk appetite improves.”
Teves said that the key to the silver market will be the gold-to-silver ratio, which has fallen to around 69 because of silver’s strong performance. The ratio historical average stands around 60.
“We expect investors to be watching the gold:silver ratio closely for signals to get involved more than fundamental market drivers for now. During periods when the ratio becomes extreme, investors are likely to get attracted to silver,” said Teves.
Wednesday, UBS increased its short-term target for gold to $1,400 an ounce.
UBS isn’t the only bank that is upgrading its silver forecast. Wednesday, Jim Steel, senior precious metals analyst at HSBC, said that he thinks the metal has potential to reach $21.50 an ounce this year.