According to Annual Silver Yearbook released Wednesday by the CPM Group, silver prices are expected to consolidate during 2015 in the midst of a strengthening U.S. economy and dollar.
The most debated and anticipated topic in financial markets across the globe is about when and by how much will the U.S. Federal Reserve raise interest rates. Any hike in interest rates by the U.S. Fed is likely to boost dollar further, which in turn could weigh on silver prices. However, CPM Group rules out the possibilities of a potential rate hike any time before September this year.
The report forecasts a sharp dip in silver investment demand during the current year. The investment demand in silver is likely to drop by 13.6% from 131.6 million ounces in 2014 to as low as 107.3 million ounces during 2015. This could turn out to be the weakest demand since 2008. The CPM Silver Yearbook notes that short term investors have moved their capital to other asset classes in search of faster returns, while long term participants are seen adding to their positions on every dip. Meantime, the report also notes that the level of investment is not adequate enough to push silver prices higher.
According to CPM Group, silver mine supply is expected to rise marginally by 1.1% in 2015 to 790.5 million ounces. However, supply from secondary market is likely to shrink by 4.7% to approximately 205 million ounces during the year.
On the demand side, silver jewelry is forecast to increase $6 from 2014 to 295.9 million ounces during this year. A rise of 3.2% is projected in silver fabrication demand in 2015. Silver consumption by fabrication industry is expected to touch 892.7 million ounces in 2015, as compared with 865.3 million ounces in 2014. The report also forecasts modest rise in silver demand from electronics and solar industry. On the flip side, demand from the photography sector is likely to decline further in 2015.