Salient to Investors:
Hedge funds have a net-short position on silver for the first time since at least 2006, but holdings in ETPs are within 1.3 percent of the all-time high reached in mid-March 2013. Silver entered a bear market on April 2. The median analyst expects silver to rise to an average of $31.25in Q4.
53 percent of supply goes into products so faster economic growth should be boosting prices, but instead manufacturers are relying on inventories at a 15-year high. Standard Bank estimates China has stockpiles for 18 months of industrial use, up from 4 months in 2009.
Stanley Crouch at Aegis Capital said silver will catch a few panic bids but that will be limited because people are realizing that the world is not coming to an end, though demand lags supplies.
Charles Morris at HSBC Global Asset Mgmt said silver is the leveraged bet on gold – if it is not good for gold, it is not good for silver either.
Goldman Sachs cut its gold price estimates on April 10 and Societe Generale said the metal is in bubble territory on April 2. Barclays, Credit Suisse, Danske Bank and BNP Paribas predict lower average prices in 2014 than in 2013.
The composite economist expects the global economy to accelerate every quarter in 2013.
Nik Bienkowski at Boost ETP said retail investors account for 60 percent of silver ETP purchases in the US.
Barclays says supply outpaced demand by a combined 15,247 tons in the past 4 years and expects a 5,512 ton surplus in 2013. Barclays says industrial demand will rise 1.7 percent to a 3-year high in 2013, and another 2.8 percent in 2014.
CPM Group said China almost tripled mine production since 2000 and imported 28 percent less metal in February, the fifth decline in 6 months. Economists expect China to grow 8.1 percent in 2013, the second-slowest pace in the past decade.
James Paulsen at Wells Capital Mgmt said the major overriding force is the risk premium and it has come out of both gold and silver as the US shows signs of growth. Paulsen said whether industrial demand will be able to offset the drop in prices because of waning safe-haven value is the big question.
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