New Risks Could 'Spark' Demand For Silver In 2018 - HSBC
(Kitco News) - Silver remains an overlooked asset, but in 2018 things could change, as prices are projected to rise based on recovering industrial and investor demand, according to HSBC’s latest silver outlook.
“We expect silver to move moderately higher in 2018 and 2019 based on strong industrial demand and limited supply,” said James Steel, chief precious metals analyst at HSBC.
The bank’s average price forecast for the precious metal is $17.92 an ounce for 2018, a gain of 4% from current prices. March silver futures settled Tuesday’s session at $17.189 an ounce. “Silver prices will be better bid in 2018 and see a price range of USD16.10-19.25/oz for this year,” the report said.
HSBC’s forecast noted that the Federal Reserve’s expected rate hikes have already been priced in by the markets and are unlikely to impact silver prices. But, any additional dovishness on behalf of the U.S. central bank could act as a price booster.
“Any resurgence in risk may spark ‘safe haven’ demand and aid prices,” Steel said. “HSBC FX strategists anticipate a broadly neutral EUR versus the USD, which should relieve silver of a potential negative FX influence.”
A key driver that could have a direct impact on prices this year is improving industrial demand for silver, Steel pointed out.
“After years of weakness, industrial demand is rebounding, led by photovoltaic and electronic offtake,” he said. “HSBC's economists forecast positive global industrial growth, which should further boost silver offtake.”
On the output side, mine supply is projected to increase slightly in 2018, but then drop in the years to come. “Tighter supply/demand balances are an important factor in our outlook,” the report noted.
Another positive factor is recovering investor demand in the form of both ETF holdings and net long speculative positions, Steel said.
“There is plenty of room for both to rebuild, notably net long positions. Investor coin and bar demand remains very weak, but should recover from low levels,” he wrote.
Even though silver prices ended the year with slight gains, the metal did not perform as well as expected.
“Strong gains in equity markets, receding geopolitical risks, and reduced investor interest in hard assets undercut silver demand. Weak jewelry demand and plunging bar and coin offtake further weighed on silver.”
These factors could still weigh silver down this year, but HSBC said it remains “mildly bullish” on the metal.