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2012 Silver Forecasts: Are Analysts On Target?

Posted on 2012-11-05, By A-Best Staff
By Michelle Smith - Exclusive to Silver Investing News

January marked silver’s best year opening performance in nearly 30 years. The metal closed the curtains on 2011 at $27.91/oz. This year its average price thus far is $31.24. For many, this may come as a surprise, but should it? Forecasts by analysts were certainly abundant, but have they served as accurate guidance for investors?

In our 2012 silver outlook, sentiment was described as “cautiously positive.” Analysts had issued widely ranging forecasts with a strong trend of predictions that the average price per ounce would be between $31-36. Based on their reports, we concluded that industrial demand would provide support for the metal’s price, but investors would be the essential component in the market’s performance.

So far in 2012, silver has moved in the direction that most analysts suggested that it would: up. For example, Scotia Mocatta’s report expressed beliefs that silver would have another high run before the market experiences a correction.

However, also prominent among analysts’ outlook for silver was fear. Many, though expressing positive expectations for the metal’s performance, appeared to expect investment trauma from the volatility and resulting losses in 2011 to hinder investment demand in 2012 as investor’s dressed their wounds.

Anne-Laure Tremblay, Precious Metals Analyst for BNP Paribas, forecasted that heightened uncertainty should put a lid on prices in the first months of the year, but the metal could regain some shine when risk appetite rebounds.

It appears that many investors regained their nerve quicker than expected.

In January, HSBC slashed its gold outlook due to a weak closing quarter of 2011. Silver ended the year in worse shape, down 10 percent, but still the firm left silver’s forecast unchanged at $34, noting that they were bullish on solid retail investment demand for coins and small bars, and expectations that ETF demand will recover.

Bloomberg data confirmed this is indeed happening, reporting that 196 tons have been added to ETP holdings.

CME Group reported an increase in net long contracts and net short contracts. COMEX silver stocks were at the highest levels since October 2008, the group stated in its morning report, adding that they had increased 14 of the last 20 days.

Silver demand from China was strong as expected during the week of the Chinese New Year festivities. But, unexpected for many were reports that demand did not fall off immediately afterward. Additionally, silver is proving to be a hot commodity in India, where investors are showing a strong preference for the metal.

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