After seeing years of sliver prices decline in 1H we saw silver make significant gains. This was down to 3 main reasons; a boosted by robust investment demand based on strength in gold, risk-off investor appetite, and geopolitical risks and we believe silver prices may remain well-bid for the second half of the year up until 2017.
This is based on solid fundamentals, as mine supply is likely to contract while industrial and jewelry demand should increase. Our expectation of gold strength is the same. Supported by an accommodative Fed policy, negative interest rates, and geopolitical risks.
Investment demand, which has remained strong this year should stabilize, while physical demand should grow: The strong pace of build-ups in ETF holdings to record highs and net long positions on the Comex are unlikely to last.
We see jewelry offtake has been improving and price sensitive coin and bar demand is strong, but may cool later this year and in 2017.