Mexico , Argentina , Guatemala , Peru and Bolivia
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How high will silver soar in 2020?

Bnamericas Published: Tuesday, February 18, 2020
How high will silver soar in 2020?

Silver prices will continue to improve in 2020 following major gains last year – but rises will be constrained by weak investor demand, according to analysts.

Global economic jitters that propelled prices higher last year will continue to spur gains this year, but the metal will remain below the peaks achieved in 2H19, experts say.

Higher prices will drive up margins for Latin American silver miners.

Mexico and Peru are the biggest miners of the metal, producing 6,100t and 4,300t, respectively, in 2018, out of total world mine output of 27,000t, according to the US Geological Survey.

PRICE EVOLUTION

From a 2019 monthly average low of US$14.63/oz in May, silver pushed up to US$18.17/oz in September, when prices hit a high of US$19.305/oz.

Prices have remained in the US$17-18/oz range since September, closing at US$17.80/oz in London on 17 February.

On an annual basis, silver showed its first gain in four years in 2019, rising 4% to US$16.21/oz, the Silver Institute said in a release, citing London Bullion Market Association prices.

“Underpinning the price rise was a marked shift towards looser monetary policies, as concerns grew about the global economic outlook, exacerbated by the ongoing US/China trade war,” the institute said.

The outlook remains positive, it added.

As a result, the institute expects silver to rise 13% in 2020 to a six-year high of US$18.40/oz.

“This rally is premised mainly on a positive spill-over from gains in gold, as the yellow metal will continue to benefit from macroeconomic and geopolitical uncertainties across critical economies,” it added.

SUPPLY AND DEMAND

Prices will be propped up by a forecast 3% rise in industrial demand.

While economic conditions remain weak, particularly in China, silver will benefit from the refilling of the supply chain following de-stocking last year, according to the institute.

Demand from the electrical and electronics sectors will account for the majority of the gains, including the automotive industry and 5G infrastructure.

The institute expects modest growth in jewelry demand and a slight fall in silver consumption in the photovoltaic sector, while investment demand will remain elevated.

Silver coin and bar buying is forecast to rise 7%.

With global mine output forecast to increase 2%, total supply is expected to outstrip demand by about 15Moz – the smallest surplus in five years.

NOTE OF CAUTION

Hopes of another bull market for silver may prove unfounded.

Despite last year’s rises, silver continues to trade broadly sideways, with prices remaining within the ranges established following sharp falls in 2012-15, according to CPM Group.

The company expects investment demand to be weak in 2020, which will limit any gains.

This is due to factors including previous disappointments in the silver investment space, prompting many investors to give up on silver and gold and others to focus on short-term trading of the metals rather than long-term buying.

“In this environment silver prices have languished,” CPM Group said. “They probably will continue to rise in 2020, but will be restrained by a lack of investment demand for physical silver in the absence of compelling economic, financial market, or political reasons to stock up on silver and gold.”

Despite the differences in opinion, CPM’s outlook is not far off the Silver Institute’s forecast.

“CPM projects that silver prices might rise around 11.7% in 2020 on an annual average basis, to around US$18.12/oz for the full year,” the former said.

Further price increases are expected later, CPM added.

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