Pivotal year for silver as bullish big banks lift price targets
Just about a week after its April 19 article titled Silvers bull market has so much more to give, 5 charts show, Bloomberg has zeroed in on another bullish driver for the white metal: supply and demand.
Output from mines will fall for the first time since 2011, while demand for the metal inuses including industrial products and jewelry is heading for a fourth straight gain, the news agency reported in its April 26 article Silver supply trouble shows why rally momentum is building.
Bloomberg was reporting the latest findings of the CPM Group in its Silver Yearbook 2016, which is projecting that newly mined silver production will fall 2.4% this year, while scrap supply will decline 1%. In contrast, industrial and fabrication demand is expected to rise by 1.6%. CPMs decline forecast follows an earlier call this year by Societe Generale.
Therefore, silver is entering what is likely to be a pivotal year, CPM said. Its chief executive, Jeffrey Christian, recently told Forbes contributor Simon Constable that he sees silver trading over $20 and as high as $25 in a few years.
The most accurate silver forecasters ranked by Bloomberg are both bullish on the metal Cantor Fitzgeralds Rob Chang (ranked No. 1) and Intesa Sanpaolo SpAs Daniela Corsini (No. 2) with Chang saying, We believe there is more upside.
What was resistance becomes support, agreed TradingAnalysis.com founder Todd Gordon in a CNBC appearance last week. We are free from the ceiling and ready to move higher.
Some major investment banks also are raising their price targets for so-called poor mans gold. Bank of America Merrill Lynch has lifted its 2016 average price by 8% to $16.47, citing shrinking supplies and rising demand, particularly in the coin, bar, and ETF sectors. It also increased its long-term forecast to $19.71 from $18.56.
Our analysis shows that fundamentals are now the strongest in years, BofA Merrill analysts said. In our view, a sustained bear market is only possible if we see investor demand take another leg lower, not our base case.
And Deutsche Bank went even further, predicting that silver could reach $20.50 in the near term thanks to ongoing easy-money policies from major central banks like the Fed and the ECB. Its also expecting improving industrial demand to drive the price higher, and for already record-level net-long positions on the Comex to increase even further.
Silver can remain dormant and underperform gold for significant periods before suddenly catching up; it tends to be a late-cycle play in the precious metals space. When this happens, it tends to happen quickly as has been the case this week, it said.
Silver coins remain one of the best ways to invest in the metals rising price. The U.S. Mint has sold 18.889 million ounces of its flagship silver American Eagle bullion coin, well on pace to break the 2015 all-time annual sales record of 37 million. Investors also should consider silver Canadian Maple Leaf coins, silver rounds, circulated Morgan Dollars and Peace Dollars, and silver bullion bars (10 oz. and 100 oz.). A green Monster Box of 500 silver Eagles also is a great way to go!