According to HSBC, silver is likely to average around $17.05/oz during 2015, significantly lower when compared with the earlier forecast of $17.65/oz.
Weak investor sentiment may adversely affect silver demand this year, HSBC noted. The bank states that strengthening dollar has led to sharp drop in investor demand. It also says that any weakness in dollar may encourage demand going forward.
The report released on Monday notes that global market deficit is likely to surge higher to 87 million ounces as against the forecast of 5 million ounces earlier. Despite this, silver prices are unlikely to gain momentum. The low prices of the commodity may affect fresh mining investments. HSBC notes that silver prices are currently 70% below its all-time high of $49.81/oz.
The overall silver supply during 2015 is likely to total 1.025 billion ounces. Silver mine production is expected to drop to 850 million ounces during this year. This is when compared with the 878 million ounces mine output during 2014. Lack of investment may lead to further contraction in mine supply, which is likely to provide support to silver prices in longer term. Meantime, scrap silver supply will register a drop for the first time after several years of growth. The scrap supply will drop to 155 million ounces, 8% lower when compared with 169 million ounces during 2014.
The overall silver demand is likely to grow by nearly 4% to 1.112 billion ounces during 2015. New applications and low prices will boost the overall industrial demand to 564 million ounces. Global industrial output is expected to grow at a slower pace in 2015. However, the strong growth in industrial output by emerging countries will boost silver consumption. Meantime, Silver jewelry demand is expected to touch 295 million ounces during the year.
HSBC has also lowered the silver price forecast for 2016 from earlier $20.50/oz to $17.65/oz.