CPM Group Calling for Silver Price Consolidation in 2015

Thursday April 30, 2015, 2:50pm PDT
By Charlotte McLeod+ - Exclusive to Silver Investing News

CPM Group released its Silver Yearbook 2015 on Wednesday, and while the document is aimed at educating investors about silver market trends and fundamentals, it likely contains few surprises for those who’ve kept an ear to the ground.

For one thing, the firm cautions readers not to expect anything too dramatic this year in terms of silver price action. Instead, it’s calling for silver price consolidation as the US economy and dollar continue to strengthen. Specifically, CPM sees the silver price averaging $16.93 per ounce in 2015, with the metal trading in a range of $15.66 to $18.51.

That’s a bit of a downer, especially given that a $16.93 average for the silver price would be 15 percent lower than silver’s average 2014 price of $19.09. It’s also disheartening given that it will put the white metal on track for its longest fall in four years — the firm notes that the silver price hasn’t fallen for such an extended period since 1991.

In terms of what’s weighing on the silver price, CPM states that an imbalance between supply and demand is part of the problem. “Silver supplies have been on the rise, driven primarily by mine supply,” the firm states in its report, adding that investors will need to absorb that additional supply if the metal’s price is to move higher.

Unfortunately, that increase in investment demand is unlikely to happen in 2015. According to the firm, net investment demand in silver will likely fall to 102.9 million ounces this year. That’s on top of a 13-percent drop to 131.6 million ounces in 2014. Meanwhile, mine output is seen increasing by 1.1 percent, to 790.5 million ounces, while secondary market supply decreases by 4.7 percent to hit about 205 million ounces.

Another factor that’s affecting the silver price — and likely will continue to do so — is the impending US Federal Reserve interest rate hike. As those who’ve been following the precious metals space are well aware, the question of when and by how much the Fed will increase interest rates has been weighing on world markets for much of 2015. That’s because higher interest rates tend to push up the dollar’s value, and that in turn tends to weigh on precious metals prices.

Unsurprisingly there’s been much speculation on both those questions, and in Wednesday’s report CPM provides its own answer to one of them, stating that it sees the first rate increase occurring in September — a few months later than some anticipate.

Finally, CPM’s report highlights a few other points for silver-focused investors to watch for in 2015. Looking at demand, silver jewelry demand is expected to rise 6.4 percent from 2014 to reach 295.9 million ounces, while silver fabrication demand should increase 3.2 percent. There should also be slight rises in silver demand from the electronics and solar industries, with demand from the photography sector sinking.

As mentioned, for those entrenched in the silver market, few of those numbers are likely particularly surprising. Nevertheless, it will be interesting to see which — if any — of CPM’s predictions come true. At close of day Thursday, the silver price was sitting at $16.11. The white metal is up just 0.22 percent year-to-date.