Silver Has More Potential Than Gold In 2017 - ETF SecuritiesBy Neils Christensen of Kitco News
Wednesday October 26, 2016 08:15
(Kitco News) - While expecting gold prices to rally to $1,400 an ounce in 2017 on continued investor demand, ETF Securities looks for silver to outperform as industrial demand drives prices.
In a recently published report, analysts at ETF Securities said that they see silver prices trading in a range of between $22 and $24 an ounce in 2017. With silver prices last trading Wednesday at $17.70 an ounce, that would mean at least a 24% gain for the precious metal.
ETF Securities’ gold-price target of between $1,400 an ounce and $1,450 would represent a gain of 10% from the precious metal’s current price of $1,272.60 an ounce.
“We are constructive on gold next year but we see more potential upside for silver given its high correlation to the industrial-production cycle, which be driven by the continued recovery in the global economy,” said Maxwell Gold, director of investment strategy at the firm, in an phone interview with Kitco News.
The investment firm noted that there is an 80% correlation between gold and silver and while silver has benefited from gold’s unprecedented investor demand, silver’s fundamental supply-and-demand picture is what will drive the price higher next year.
Gold noted that his firm is expecting to see strong silver demand in electronic components, especially as companies use the metal as a substitute for more expensive options like gold -- also known as thrifting.
He added that the solar sector, especially in China -- now the global leader -- will to continue grow. At the same time, ETF Securities expects to see a drop in supply as mining production falls as a result of lower capital expenditures.
“We do see the importance of silver’s investor demand, but overall silver is much more dependent on supply-and-demand factors,” he said. “We see constructive fundamentals for silver going forward both by continued expansion of global industrial activity and reduced mine activity.”ETF Securities’ gold and silver price forecasts would push the gold/silver ratio back to historic norms at 64. The ratio was trading Tuesday around 72, its highest level since early June.
Both gold and silver have been two of the top assets so far this year. Investor demand as a result of global negative bond yields have pushed gold prices up 19%. Silver, because of its higher volatility, is up 28% since the start of the year.