What’s the silver outlook for 2018? Overall market watchers are calling for slightly higher prices as the white metal follows gold upward.
The silver price saw some ups and downs in 2017, but overall it looks set to end the year fairly flat — as of Monday (December 4), it was up only about 2.3 percent year-to-date, sitting at around $16.30 per ounce.
Many analysts believe 2018 will bring a slightly improved price. According to Metals Focus, the white metal should average $20.60 next year, up over $3 from its $17.13, its average 2017 price as of November 10.
Experts polled by FocusEconomics agree — in a report published recently, the firm lists forecasts from over a dozen different outlets, with the lowest 2018 average forecast being $16 and the highest being $21.30. Overall, the consensus silver price forecast for next year came in at $17.80.
Chart via FocusEconomics.
Analysts who are bullish on silver in 2018 have a variety of reasons for their thinking, but many have mentioned that they see the white metal following gold on an upward trajectory.
For instance, TD Securities analysts said in their 2018 Global Outlook that “underperforming silver is set to shine as gold improves amid still low real rates, firm demand, weak supply and higher [volatility].” They expect silver to average $18.50 over the first half of 2018, and $19.25 in the second half of the year.
Bart Melek, the firm’s head of commodity strategy, noted that prices for both gold and silver are expected to increase over the next 12 months because “we don’t think the Fed is going to be anywhere near as hawkish as its statements are indicating.” TD Securities also sees investors using precious metals as a hedge if equities continue to stay in record territory.
In a November interview, Frank Holmes of US Global Investors (NASDAQ:GROW) also suggested that silver could follow gold upward. He said, “when gold goes to $1,350 per ounce you’ll get a quantum leap in silver. Silver always has sort of a catch up, and all of a sudden it’s the best-performing [metal].”
Similarly, Frank Basa, president and CEO of Castle Silver Resources (TSXV:CSR), said “silver’s price is likely to move higher along with gold as the US currency loses its position in the world market.”
Silver outlook 2018: Supply
In terms of supply, the silver market is expected to remain in a fundamental surplus for the third year in a row in 2018, with an excess of about 70 million ounces, according to Precious Metals Investment Focus 2017/2018. Mine output is expected to rise marginally in 2018, and a recovery in recycling will see total supply record its first annual increase in four years. Metals Focus estimates that total silver supply for all of 2018 will be 1,045 million ounces.
Not everyone agrees with that forecast, however. Maria Smirnova, senior portfolio manager at Sprott Asset Management, said earlier this year that the world will see a deficit of 50 million ounces of silver over the next three years as mine output declines.
“We’re just not seeing silver discoveries. We’re not seeing a lot of viable future mines in silver. It’s a problem, and that’s what reinforces our positive view on the silver price,” she explained.
Smirnova, who manages the Sprott Silver Equities Class mutual fund, noted that it is harder to find an economic gold deposit than it is to find an economic silver deposit given current prices, and therefore there has been “huge underinvestment” in the silver industry.
She said a decline in discoveries and future mines coming online has meant that more companies are choosing not to focus solely on silver. For example, Silver Wheaton recently changed its name to Wheaton Precious Metals (TSX:WPM,NYSE:WPM) after making a series of gold investments.
Nevertheless, companies focused primarily on silver do exist, and some are making strides. Americas Silver (TSX:USA) CFO Warren Varga said, “we’re very excited looking into next year.” The company began processing ore from its San Rafael silver-zinc–lead mine in Mexico in September, and commercial production is expected by the end of 2017.
Varga added that the company expects to do more drilling at the 120 zone deposit contiguous to San Rafael and said, “we’re looking forward to seeing results from that drill program in 2018. [It] should be done within the first half, and we should be able to get results out to the market before summertime.”
Silver outlook 2018: Demand
Looking at demand, Metals Focus says that silver bar and coin demand is seen recovering in 2018. Meanwhile, demand for silver in jewelry and silverware is expected to grow, but price increases in countries such as India will mean gains will be modest.
Industrial offtake is forecast to grow by 2 percent in 2018 and should reach an all-time high on rising demand from the solar and automotive sectors. Demand for silver in solar panels is expected to increase due to the Chinese National Energy Administration’s goal of increasing capacity by 110 gigawatts between 2016 and 2020.
Overall, Ron Tremblay, President and CEO at Levon Resources (TSX:LVN) said he sees the market improving for silver in 2018. He added that investors should “be patient [because] this market will turn.”
For his part, Nicholas Konkin, marketing and communications at Golden Arrow Resources (TSXV:GRG), believes that the silver market is “definitely showing signs of appreciation,” and presents an “interesting buying opportunity for investors to get into the market and position themselves. When the silver market does in fact go up, it will go up in a hurry, and you want to be ready.”
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.
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Castle Silver Resources and Levon Resources are clients of the Investing News Network. This article is not paid-for content.