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Market Review: Improving Investor Sentiment Will Drive Silver Prices Higher

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Improving investor sentiment will drive silver prices higher.

This was the conclusion drawn from the Metals Focus/Silver Institute Interim Silver Market Review. Metals Focus director Philip Newman presented the data during the Annual Silver Industry Dinner hosted by the Silver Institute. His presentation featured historical supply and demand statistics and provisional estimates for 2019.

According to the report, even with the recent modest pull-back in the silver price, the last few months have seen a major improvement in investor sentiment toward silver. The white metal rallied to a three-year high of $19.65 in early September. This was accompanied by a decline in the silver/gold ratio to a one-year low.

Silver has given up some of those gains in recent months, along with gold, primarily due to market optimism about a resolution to the trade more. But fundamentally, little has changed since silver made its most recent bull run. The Fed is still engaging in extraordinarily loose monetary policy. We continue to see shaky economic data. And despite all the talk, the trade war drags on.

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In terms of demand, silver industrial fabrication will hold at a record high for the second straight year. This despite the escalating US-China trade war putting a drag on several areas of electrical and electronic end-uses. However, the negative impact on silver demand has been mitigated by higher silver loadings, especially in the all-important automotive sector. Additionally, silver consumption in the photovoltaics sector has also grown as more countries push ahead with renewable energy projects in 2019.

Global silver jewelry and silverware demand are projected to grow by 3% and 4% respectively in 2019.

Healthy gains are also expected for physical investment in 2019, with sales of silver bars and coins projected to rise by 7% to a three-year high. In the US, investment is on track to record its first annual increase in four years, thanks to improving price expectations and rising price volatility.

Earlier this year, key silver producers were forecasting an increase in mine output. But due to a number of factors, it now appears silver mine production will fall by 0.7% to 849.3 million ounces this year.

Newman said that the silver market looks bullish going forward.

Overall, the silver market is expected to record a small surplus in 2019. That said, this metal should be easily absorbed by investors as rising macroeconomic uncertainties and fresh monetary easing by major central banks rejuvenated the appeal of safe-haven assets from mid-2019 onwards which, looking ahead, should continue to benefit precious metal prices.”

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