HSBC: Silver To Remain Strong In 2H; Upper End Of Range At $21.50
Friday July 29, 2016 09:28
(Kitco News) - HSBC looks for silver prices to remain well bid in the second half of the year, projecting the upper end of the metal’s trading range at $21.50 an ounce.
The bank upped its full-year average forecast to $18 an ounce Thursday from $15.90 previously and lifted its 2017 average forecast to $19.25 from $18.
As of 9:15 a.m. EDT, spot silver was at $20.295 an ounce, up 47% for the year to date. The metal has been boosted by robust investment demand as gold also rose and amid risk-off investor appetite and geopolitical risks, HSBC said.
“We believe silver prices may remain well bid for the second half of the year…and into 2017,” HSBC said, projecting a price range for the final six months of the year of $16 to $21.50 an ounce. “We base this on solid fundamentals, as mine supply is likely to contract while industrial and jewelry demand should increase. Our expectation of gold strength is supportive, as are an accommodative Fed policy, negative interest rates and geopolitical risks. Investment demand, which has been strong this year, may cool but should remain positive.”
In particular, HSBC suggested tighter supply will be price supportive. After steady production increases for more than a decade, mine supply looks set to decline this year and in 2017, the bank said. HSBC projected the 2016 silver-market supply deficit will be 213 million ounces.
“Higher prices may contribute to increased scrap supply, but near-term available material may be limited,” HSBC said. “Tighter supply is a key factor in our mildly bullish outlook for silver.”
The bank said the build-up in exchange-traded-fund holdings to record levels and high net-long positioning in Comex futures are unlikely to last, with Comex net length potentially leading to liquidation. However, the bank said its “modestly positive global economic forecasts imply a mild recovery in industrial demand.” Also, jewelry offtake has been improving, HSBC added.