Silver price prospects set fair — Lawrie Williams

Jon Government

According to the latest figures from GFMS, prepared on behalf of The Silver Institute – global silver production fell by 5 million troy ounces last year – the first fall in new production for 15 years. Although the fall was a minimal 0.6%, global silver demand in 2016 was estimated to have exceeded supply by a rather larger 147.5 million ounces – a seemingly ever-continuing global deficit in silver supply vs demand. Further some preliminary Q1 figures from some of the leading producers suggest that supply may fall further in the current year, perhaps rather more sharply, while demand will likely be unchanged, or perhaps higher still with growth in the photovoltaic sector in particular.
Whether real supply/demand figures have much impact on silver prices short term is contentious – the price is driven largely by some rather anomalous dealings in the futures markets, but in terms of a long term trend, assuming these are continuing signs of future continuing, and perhaps growing, shortfalls in supply, fundamentals are likely to assert themselves as time progresses.
Longer term, the decline in usage in photography, which used to be silver’s main area of demand, now seems to have dwindled to almost insignificant proportions, and has been more than replaced by growth in the photovoltaic sector – which is continuing to see annual advances due to the increasing impact of the green energy sector. Other industrial uses do seem to be growing too so there remains a good prospect of continuing supply/demand deficits provided investment demand holds up. Should gold advance too then the prospects for silver would seem to be set fair. Recently the Gold:Silver Ratio (GSR) rose back above 75. As gold steadies and rises the GSR should fall back to silver’s advantage. We have been predicting a level of 65 which could prove conservative – but remember 2011. If silver rises too far too fast it will likely be brought crashing down again by the big money to protect some very large short positions.
Caveat emptor.

This post was published at Sharps Pixley