Banks cut silver forecasts after second-quarter drop: Reuters poll

Banks expect gold to match its 2016 average this year, but cut their silver price forecasts after the metal slid 9 percent in the second quarter.

A poll of 39 analysts and traders conducted by Reuters this month returned an average silver price forecast of $17.32 an ounce for 2017, down from an average view of $17.98 in a similar poll conducted three months ago.

That is just over 1 percent above last year’s average of $17.09 an ounce.

“Unlike gold, silver has been pretty volatile and to an extent weak,” Harish Galipelli, head of commodities at Inditrade Capital, said. “The weakness in base metals along with weakness in gold seems to have impacted silver prices more, with it being both a precious… and an industrial metal.”

Silver was the worst performer of the major precious metals in the last quarter. It may see a revival in late 2017 and 2018, Galipelli said, due to an uptick in industrial demand.

Poll respondents see silver, which is used in electronics, rising to an average $18.30 an ounce next year, its highest annual average since 2014. That is 3 percent below the 2018 average forecast in the April poll, however.

Gold prices are expected to average $1,250 an ounce this year, the poll showed, below the forecast of $1,254 returned three months ago.
The metal ended the second quarter little changed after a strong start to the year, as expectations that the Federal Reserve would soon scale back its $4.5 trillion balance sheet weighed.

That would likely prompt a rise in U.S. Treasury yields, lifting the opportunity cost of holding non-yielding bullion. The extremely low interest rate environment in place since the financial crisis has been a key factor supporting gold prices after a decade-long rally peaked below $2,000 an ounce in 2011.

Besides tightening monetary policy in the United States, central banks in Europe and Canada have showed that they are considering scaling back ultra-loose policies.

“Although we expect gold prices to remain elevated during the second half of 2017, we have lowered our forecasts slightly, reflecting indications from some of the world’s main central banks that monetary policy will become less accommodative,” Cailin Birch, senior commodities analyst at the Economist Intelligence Unit, said.

Next year gold is seen averaging $1,292 an ounce, below a forecast of $1,300 an ounce returned by the April poll.