Last year was tough for silver with lower demand muting prices.
But the Silver Institute is bullish on the white metal for 2019, projecting a rebound in demand coupled with lower mine output.
According to the Silver Market Trends 2019 statement, preliminary estimates point toward a minor 0.3% increase in total supply last year as demand contracted by about 3%.
The institute pinpointed several factors that dragged down the demand for silver in 2018, including a slowing Chinese economy, rising US interest rates, the bull run in equity markets early in the year and global trade tensions.
But the Silver Institute expects a turnaround in sentiment to be supportive of silver in 2019. In fact, the first month of the year was already a positive one for silver investors.
“The US Mint, for example, sold 12% more American Eagles in January compared to January 2018. In addition, the expected slowdown in the US FED rate hiking cycle should also benefit silver, which in comparison to gold, has a very attractive price point based on the high gold: silver ratio at around 82.”
The Silver Institute projects demand from industrial fabrication to rise modestly over the next year. This accounts for about 60% of total silver demand. The use of silver in photovoltaic (PV) power production expanded significantly in recent years with continued efforts to diversify energy generation away from conventional fossil fuels and toward a higher share of renewable sources. The Silver Institute expects PV demand to continue to be “very supportive” of silver usage in the near-term.
Silver jewelry demand is expected to record a solid year of growth in 2019. Thailand is set to serve as one of the driving forces behind the rise. The Silver Institute also expects strong sales in the US as consumers turn to the while metal as a lower-cost alternative to low-karat gold.
The institute also projects strong demand for silver in the investment sector, with a 5% increase in 2019.
“Bullion coin demand has been strong in the United States during January of this year, and we expect sentiment in Europe, which rose by 6% in 2018, and India to be supportive of global growth as the year continues. Bullion coin demand in the US fell last year, but non-bullion silver coins rose for the second consecutive year by 42%.
Demand for silver in India will help drive global demand. Indians love gold, but they also have a strong appetite for silver. The country is projected to be one of the world’s leading silver consumers in 2019. Silver imports reached nearly 225 million ounces last year, over 35% higher than in 2017.
The Silver Institute projects mine output to fall by about 2% in 2019.
“While we expect a small rise from silver recovered in gold mining, all other primary and by-product production is expected to fall, except for supply from lead/zinc operations which are forecast to rise this year.”
With a modest increase in the supply of scrap silver, the institute projects the market will roughly balance in 2019 with all of the silver produced being absorbed by the various downstream sectors.
The Silver Institute projects prices in 2019 to rise to about $16.75 per ounce. That would represent a 7% increase over the average 2018 price.
“The volatility in the equity markets is motivating investors to look for alternative options such as precious metals, which will boost silver investment.”
The Hightower Report also has a bullish outlook on silver.
“Historically, gold has been the most influential force for silver, and it looks like it will be in a position to lead silver higher over the next few quarters. Even the dollar could become a positive force for metals, as it looks ready to turn lower after its 11% rally in 2018.”
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