Supply-and-demand factors for silver continue to suggest a bullish price picture in the year ahead. Thats what investors can surmise from the new World Silver Survey 2016 produced by Thomson Reuters GFMS in conjunction with the Silver Institute.
Consumption has perhaps never been higher. The surveys look back over the past year confirms that the silver market saw record demand in 2015, with the jewelry, coin and bar, and photovoltaic sectors posting new highs, helping to boost total silver demand to 1.17 billion ounces last year, the institute wrote in summarizing the survey.
Coin, bar consumption surging: Industrial uses for silver comprise the largest component of consumption, but investment demand also hit new peaks in 2015. Identifiable investment, which includes physical bar investment, coins and medals, and exchange traded product (ETP) build, climbed 16% to a near record high in 2015, the institute noted.Silver coin and bar investment surged 24% to reach 292.3 Moz, the highest annual demand level in GFMS records, overtaking the previous high in 2013. Coin and bar demand accounted for 25% of total physical demand in 2015, the highest market share on record and up from just 5% a decade earlier.
In contrast, readily available supplies are dwindling. Although annual production hit record highs in 2015, the rate of growth is faltering. The overall slowdown in mine production last year is expected to continue, the institute predicted. This forecast follows CPM Groups similar call in recent weeks that newly mined silver production will fall 2.4% this year.
Scrap supply also dried up in 2015, significantly down by 13% at 146.1 Moz, the lowest volume level recorded since 1992 and the fourth consecutive year of decline.
Upward trend for silver price: Given these tensions between supply and demand, its no wonder that GFMS is bullish on the price. Whats surprising, however, is that it seems to be lowballing the white metals potential. After all, silver is up more than 20% this year and was trading around $17.43 on May 5.
GFMS has set an average annual price of $15.90 for this year. If that seems low, consider this: We also forecast on a quarterly average basis, and the average for the fourth quarter is $16.80, GFMS analyst Erica Rannestad told Silver Investing News. So overall, we expect an upward trend for silver prices over the course of this year.
The firm sees silver moving even higher in 2017, producing an average price of $17.50.
With loose monetary policies from global central banks showing no signs of stopping, silver is a great way to hedge against ongoing currency devaluations. And everyday investors by and large are choosing silver American Eagle bullion coins as their go-to method. As of May 4, almost 20 million (specifically 19,915,500) silver Eagles have been sold so far this year. Thats 26.8% more than at the same time in 2015, during the record-setting year that saw 47 million Eagles purchased. Thus, 2016 is proving to be another blockbuster for the U.S. Mints flagship bullion coin.