After Falling 8% in 2018, Silver Price Expected to Rebound

MajorsApr 15, 2019

After Falling 8% in 2018, Silver Price Expected to Rebound

Silver averaged $15.71 last year but is expected to rise to nearly $17 an ounce this year, Refinitiv said.

The “Tented Maya” earrings from M. Hisae retail for $160 in sterling silver. Silver jewelry demand rose in the United States, with analysts noting the importance of the category for women looking to buy a piece of jewelry for themselves that’s $500 or under.

New York—The price of silver is expected to climb this year after dropping nearly 8 percent last year, an analyst said Thursday at the release of The Silver Institute’s World Silver Survey 2019.

According to the survey, the average per-ounce price of silver fell by 7.8 percent to $15.71 in 2018, with prices ranging from $13.97/ounce to $17.52/ounce. The main factor impacting the silver price was the trade dispute between the United States and China, which strengthened the U.S. dollar and dragged down metal prices.

This year, Refinitiv (the new name for Thomson Reuters’ financial and risk business) predicts silver will average $16.75 an ounce, Lead Metals Analyst Johann Wiebe said.

“Silver has been lagging gold prices for a quite a while and we feel it has some catching up to do,” Wiebe explained in an email following the event. “On top of that, we expect a more favorable investment climate this year and next. This is mainly driven on a weaker macro-economic climate in the U.S. as well as China.”

In general, this is good for gold because it is so heavily investment focused, but silver will benefit too, Wiebe said. He also noted that a weaker U.S. dollar will contribute to driving the prices of all precious metals higher this year.

The GFMS team at Refinitiv researches and produces the survey for The Silver Institute, which, in addition to price, covers supply and demand for silver in investment, industrial fabrication and jewelry.

Jewelry Demand Climbs
The survey shows that globally, silver jewelry fabrication demand increased 4 percent year-over-year in 2018 to 212.5 million ounces.

While India was the standout performer—demand there rose 16 percent—the U.S. also recorded solid silver sales, with demand increasing 7 percent to hit an all-time high of 17.4 million ounces.

Wiebe said retailers in the U.S. are “still keen” to stock their cases with silver jewelry, as it generates profit margin and gives them something to offer women looking to buy a piece of jewelry for themselves for $500 or less.

The “Tented Maya” earrings pictured above on a model. Michelle Hisae Meronek, the designer behind M. Hisae, said she often thinks about how to use silver in a way that “evokes personality and play,” which the metal’s cost allows designers to do. “I’m allowed to think bigger,” she said, “while still keeping my customers in mind.”

However, the survey noted that

various silver fabricators indicated the rate of growth slowed a bit last year, as silver jewelry faces increasing competition from on-trend yellow gold.

Silver jewelry also is not immune to the one of the biggest challenges currently facing all jewelry, be it gold, diamond or gemstone: How and where do jewelers and brands connect with younger consumers?

“The difficult bit is to get ahold of the millennials today,” Wiebe said in his presentation Thursday. “How do you reach the millennials? They are constantly online.”

The results of the World Silver Survey support the findings of the annual survey the Silver Promotion Service, the Silver Institute’s marketing arm, does in concert with InStore magazine.

Released last month, the SPS/InStore survey for 2018 showed that 52 percent of U.S. retailers saw silver sales increase year-over-year. The category also continues to generate the best profit margin for jewelers, with 40 percent indicating it was their top money-maker over the holiday season.

Meanwhile, Refinitiv said overall silver demand rose 4 percent to 1.03 billion ounces last year, fueled mainly by the recovery in retail investment, including the 53 percent jump in demand for silver bars.

The increase in demand was particularly pronounced in India, where silver bar demand more than doubled, rising 115 percent.

Supply Remains Tight
Global mine supply fell for the third consecutive year, slipping 2 percent to 855.7 million ounces following supply disruptions in the U.S., Canada and Guatemala.

Output dropped 17 percent in the U.S. due mainly to several issues at Americas Silver Corp.’s Galena operations, where the mine shaft was shut for more than two weeks. Operational issues also plagued Canada, with production falling 32 percent after a fire in the smelting facility and continuous maintenance problems at Teck’s Trail operation.

These sterling silver earrings from Aimee Petkus Jewelry feature tabasco geodes and spessartine garnet on quartz (retail price $375). Designer Aimee Petkus exhibited with M. Hisae in the New Designer Gallery at the recent JA New York Spring show.

Offsetting those losses was record output in Mexico, which remains the No. 1 producer of silver in the world. The country’s 2018 output totaled 196.6 million ounces, followed by Peru (144.9 million ounces) and China (114.9).

The U.S. ranked as the ninth largest producer of silver in the world in 2018, with production totaling 28 million ounces, while Canada was No. 11 at 24.8 million ounces.

Silver scrap supply also fell by 2 percent year-over-year, due mainly to lower suppliers discouraging suppliers and consumers from recycling silver.

The rising demand and shrinking supply resulted in a physical market deficit of 29.2 million ounces, which is about 3 percent of annual demand and considered a balanced market.
Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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