FxWirePro: Silver outlook – Drop below $10/troy ounce likely

Supply/Demand is broadly balanced in Silver, unlike other industrial metals or even oil. According to World Silver Survey, 2015 (WSS, 2015). Net surplus in silver market was 2.6 million ounce. However, Silver isn't likely to have similar appeal as of Gold as risk aversion investment. Price volatility and sharp drop likely to reduce demand for silver, even if Gold finds safe haven bids.

However, Silver is still likely to move in high correlation to Gold, so erosion would be gradual. According to WSS, 2015, Total physical demand for silver in 2014, stood at 1067 million ounces in 2014 and almost 20% of that demand was from physical investments, in the form of Coins and bars.

We don't expect despite market turmoil of 2016, demand for investments in silver to rise much. Cheap gold will be attracting large chunk of such investments.

Technically too, outlook of Silver is quite grim.

Trade idea -

Sell silver at current price of $14.3/troy ounce and at rallies targeting $8.8/troy ounce and with stop around $18/troy ounce.