Silver’s downside risk limited; Prices to average at $20.440/oz in 2014: CPM

WASHINGTON (Scrap Monster):  The Annual Silver Yearbook 2014 released Tuesday by the New York-based CPM Group predicts that Silver prices are most likely to consolidate during the year. The analysts note that the downside potential is limited for the white metal. The rising supply and weakening investment demand may drag the Silver prices to $20.440/oz, dropping significantly from the 2013 average of $23.750/oz.

According to the report, the sharp decline in Silver prices during 2013 was one of the key factors that helped to drive the demand growth in Silver jewelry sector. However, the Silver prices are not expected to fall significantly during the year 2014. Consequently, demand growth for Silver jewelry is likely to remain relatively weak in 2014 when compared with the previous year.

The CPMG report states that the global silver surplus at the end of 2014 will decline nearly 17% from 105 million oz during 2013 to 87 million oz towards end-2014. The total supply of silver from mine output, scrap, coin melts, and government sales is expected to rise marginally from 971 million oz in 2013 to 977.6 million oz in 2014. Mine output alone may witness nearly 3% growth in 2014.

On the demand side, fabrication demand is expected to improve slightly by 2.9% from 865.8 million oz in 2013 to 890.7 million oz this year. Meantime, the low investment demand witnessed in 2013 may continue this year as well. Investors are forecast to buy 86.9 million oz od silver during this year, but these purchases may not spark a big rally in prices, though they may be sufficient enough to prevent prices from declining steeply.