Silver seen at $30/oz over next 6-12 months - Citi

Investing.com -- Silver could hit $30 per ounce highs over the next six months to a year, with imminent support seen from buyers eyeing value in the metal after its sharpest price slide in a month since February, Citigroup says.

“We think recent price weakness offers a strong dip-buying opportunity, reiterating our call for $30/oz silver over the next 6-12 months as U.S. growth rolls over, even if emerging markets growth stagnates,” Citi’s analysts said.

Benchmark Silver futures on New York’s Comex hovered at above mid-$23 levels in Tuesday’s trade, down almost 7% for May after cumulative gains of 20% over the past two months that took the metal above $26 at one point. 

“We expect silver would rally in anticipation of the fall in U.S. interest rates and real yields that will likely accompany an anticipated rollover in U.S. growth in Q4’22 or early 2024,” Citi’s analysts said. “This should weigh on the dollar, with Citi economists expecting U.S. rates and the dollar to weaken further (DXY to 96).”

With some market punters seeing the Federal Reserve cutting interest rates by as early as September — despite the central bank’s more hawkish officials advocating tighter monetary policy for the foreseeable future — silver looked fundamentally poised for better returns, Citi’s analysts said.

“This should all underpin ETF demand for silver,” the analysts said, referring to exchange-traded products linked to the commodity. “Weaker competition for investment capital from other asset classes should also support silver pricing as markets increasingly price U.S. recession risks.”

Citi’s analysts also cited potential silver demand from China from the second half of this year.

“Our economists expect China to continue to gradually recover and any associated rebound in EM growth sentiment could be an incremental tailwind for silver — Emerging markets demand for silver has been weak with China and India destocking.” 

“We expect China demand could recover in 2H 23 following further easing measures by the PBoC.”

“China’s sluggish economic recovery has hit silver demand, with local premiums falling to 0.3% in April. Further easing measures to boost China’s economy could translate to stronger silver demand in 2H’23.”

India was another promising market, the Citi note said.

“India is a price-sensitive market which may continue destocking amid higher prices in 2023,” the analysts said.