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(Kitco News) -
Silver investors shouldn’t expect any positive price action in the near term, but the precious metal is still on track to finish the year on a high note, according to a new research report from ANZ.
The authors write that weakening demand from the Asian giants remains a short-term drag on silver, and note that “Silver normally underperforms when the gold price is falling.”
Gold prices have pulled back over the last six weeks, with XAU/USD trading at $1957.24 at the time of writing, up 0.7% on the session but well off its early May highs above $2050.
The analysts note that investors have been selling off their silver holdings in recent weeks. “Speculators liquidated 2,150t of long positions in the last three weeks of May,” they wrote. “Institutional investors have also liquidated 235t of ETF holdings during the same time.”
Turning to physical demand, ANZ said that developments in physical markets were not encouraging either. “Weakening economic growth in China is dimming prospects of industrial demand,” they wrote. “This is reflected in an easing in the Shanghai spot premium, which has been falling since April with retreating silver imports.” They added that India’s imports appear to be leveling off following an exceptionally strong 2022.
These headwinds have contributed to silver’s price underperforming that of gold, they said, with the gold:silver ratio “climbing from 78.5x to 85x” in May.
“That said, the fundamental backdrop is still supportive,” the analysts said, “and industrial demand could return once China’s growth stabilises.”
They also note that ongoing macroeconomic challenges continue to support gold and silver prices. “We hold our bullish view and expect silver prices to reach USD26/oz by the end of this year,” they said.
