Silver: ETF Securities expects longer-term path of least resistance is up

Silver rose with gold on safe-haven demand last week, but silver also has a larger role as an industrial commodity. 

 

With the most recent data from China showing signs of a  rebound and the reserve ratio cuts by the PBOC (People’s Bank of China) adding to potential momentum, ETF Securities expects cyclical commodities like silver to continue to benefit.

 

China is the world’s largest user of silver and the cumulative data to April show China silver imports are up 17% (year-on-year). Unlike gold, silver ETP (exchange-traded-product) inflows have been strong and sales of silver coins are growing at a record pace. U.S. Mint silver coin sales in 2014 are running about 6% above the record pace of 35 million ounces in 2013 – roughly equal to total U.S. silver mine production. 

 

Most of the demand for silver is for industrial purposes and the largest growing category is electronics related, notably solar panels. Total available silver bullion inventories have declined substantially to about a year's worth of mine production, compared to about seven times in 1990. 

 

The price of silver has averaged about US$20/oz in 2014, approximately a 15% discount from 2013, which is increasing demand and reducing secondary supply. 

 

Silver volatility recently reached the lowest levels in a decade, indicating a sharp price move soon. ETF Securities expects that the longer-term path of least resistance is up.