Last week precious metals fell significantly as market players interpreted comments by the Federal Reserve to mean that a third round of quantitative easing may be less likely. The U.S. monetary authorities will soon be ending their latest stimulus measure. However, investors and traders have been expecting weak GDP growth and persisting unemployment rate to prolong dollar-debasing measures.
Silver imports into India, the biggest consumer of the white metal, are likely to decline up to 27 percent this year on expectations of volatile prices, despite import duty remaining unchanged, the head of the country’s biggest bullion importer said on Monday.
Silver imports into China are so far down by a third y/y for the YTD, but China remains a net importer of silver.
Barclays have today released a note on the outlook for the silver price. At present, the pressures on silver are to the downside. Suki Cooper at Barclays notes that, “concerns around economic growth leaves industrial demand vulnerable and prices exposed to the downside.”
However, a weak non-farm payrolls report released in the U.S. last week may lead to a rebound in expectations and a comeback for silver prices in a longe term.
Gold has taken the spotlight over the last few years as inflation protection and a hedge on global economic uncertainty, but silver also fulfills that role.
Silver prices per troy ounce hit a record last year at $50, because of the credit crisis in Europe, but have since come down to $32 per troy ounce. Further stimulus measures out of China, expected sometime in the second quarter, will also act to drive silver prices upward.
With the highest electrical conductivity of any element, silver has important uses in electronics and jewelry.
Peru is the largest producer with approximately 18.0% of world production, followed by Mexico (15.7%), China (13.5%), Australia (7.6%), and Chile (6.7%).
While the possibility exists for supply disruptions through labor unrest, most producing nations are fairly stable and the supply is spread over many countries.
The return of the fear trade from a re-escalation of E.U. debt problems and heightened expectations of further easing by the Fed may drive silver prices over the second half of 2012. However, as of now, the outlook is rather negative.
