bullion silver market

Silver Market Pauses

May 5th, 2016 by

Since surging as high as $18/oz as April came to a close, the silver market has retreated slightly to $17.50/oz and subsequently traded sideways. Nonetheless, the outlook for the argent metal remains strong according to most experts.

“Improving” Economy

employment reportThere were a series of reports in the U.S. that traders took as extremely encouraging. According to DailyFX, as reported via Nasdaq, “The move higher in silver prices following the publication of the ADP Employment Change (it printed 156k vs. the 200k expected) was not enough to spur a bullish trend. Higher than expected readings of U.S. Unit Labor Costs and the ISM Non-Manufacturing Index, countered the bullish impulse given to silver prices by the soft ADP report.”

These conflicting reports have led to a sideways silver market—meaning that prices have largely gone nowhere the past few trading days. Accordingly, spot silver prices were essentially flat at $17.40/oz during Thursday afternoon’s trading session.

Silver Market in 2016

Senior Thomson Reuters GFMS analyst Erica Rannestad made the argument that silver will maintain its upward trend throughout the year. “We’ve seen prices reach [15-month] highs last week and we expect that trajectory to continue through the 4th quarter of this year.” She said that the rally has been fueled by safe-haven demand this year—as opposed to value-oriented traders looking for bargains over the past three years.

silver nuggetTo find support for this view, one needs only look at the trends that began last year in the silver market. When we factor in what’s been seen through the first four-plus months of 2016, it’s clear that the overall pattern is upward. Here are a few highlights of rising demand and falling supply:

 

  • Exchange-traded funds backed by silver have seen their holdings rise by 35 million troy oz thus far in 2016. By comparison, last year saw an 18-million oz outflow.

 

  • Demand for silver coins and silver bars, which are generally investment vehicles, rose by 24% year-on-year in 2015. Several government mints ran up against supply shortages last summer.

 

  • Despite an overall 4% drop in silver fabrication last year, the U.S. and Japan (the second- and third-largest industrial silver markets) actually saw industrial demand for silver rise.

 

bullion silver market

  • Standing out from other components of industrial demand (which dropped last year), silver used for photovoltaic cells (solar panels) and as a catalyst for ethylene oxide (medical equipment sterilization and various industrial applications) saw increases of 23% and 103%, respectively. (In fact, the equivalent of 16% of the global silver mine supply was processed by EO plants last year.)

 

  • Overall silver demand in 2015 was the highest on record, as was the proportion made up by investment demand (25%).

 

  • Recycling of scrap silver fell by 13% last year, the fourth consecutive year it declined.

 

  • The growth of the mined silver supply rose by just 2% last year and is expected to keep slowing down. Total silver mine production reached an all-time high of 886.7 million oz (27,579.5 metric tonnes), indicating it may be peaking.

 

The data above was reported by The Silver Institute, founded in 1971 to bring together producers, refiners, manufacturers, and dealers from around the world.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.