UNITED STATES June 02 2017 10:21 AM
NEW YORK (Scrap Register): Silver prices will surge in the second half of 2017, jumping above $20 an ounce, led by the Federal Reserve’s slow tightening of monetary policy, weaker U.S. dollar, and economic and political risks, according to The Silver Focus 2017 report released by Metals Focus.
Analysts at Metals Focus expect the global macroeconomic environment to remain and indeed become more positive for precious-metals prices over the rest of the year and probably beyond. As a result, we forecast that the silver price will rally in the second half of 2017, with a breach above $20 looking likely in the fourth quarter.
The key factor to watch in 2017 is the pace of Federal Reserve rate hikes. While rising rates will probably remain in place for the foreseeable future, the speed at which monetary authorities move towards ‘normal’ policy will continue to be slow and probably no faster than markets are currently pricing in.
The 2017 forecast states that a short-lived sell-the-rumor/buy-the-fact rally is possible after an almost certain hike in June, but the overall negative-rate environment fosters ideal conditions for silver prices to rise this year.
U.S. economic indicators are also on the list to watch when it comes to projecting silver-price moves for the year, the report noted. And all the indicators are pointing to the economic progress falling short of expectations.
Looking ahead, Metals Focus is skeptical over the scope for reflationary fiscal and trade policies to be implemented by the current administration, causing further disappointment to emerge. We also feel that U.S. equities look expensive as both the S&P 500 and Dow Jones Industrial Average indices are now trading near all-time highs. A correction therefore looks likely and this would be positive for precious metals.
With this in mind, the U.S. dollar upside also looks to be limited, which is beneficial for silver. On top of that, economic conditions in the eurozone are continuing to improve, which means the greenback could face additional pressure in the second quarter.
Geopolitical risks are not subsiding either this year, which is a good thing for the precious metal. There remain an abundance of political tail risks on the horizon. These include the ongoing internal challenges that the current U.S. administration faces, tensions in the Middle East as well as the Korean peninsula and the outcome of Brexit negotiations.
At the very least, while these and various economic issues (such as debt growth in China) continue to brew in the background, they should continue to favor incremental safe-haven interest in precious metals. The report also projects healthy professional-investor interest in silver for the rest of the year.
All of this should provide essential fuel for the silver price to rally in the second half of the year, driving the full-year average to $18.30, a level some 7% higher than last year’s figure.