A major Japanese electronics maker approached First Majestic Silver Corp. for the first time last month seeking to lock in future stock, a sign of supply concerns that could boost the metal’s price ninefold, according to the best-performing producer of the metal.
“For an electronics manufacturer to come directly to us — that tells me something is changing in the market,” said Keith Neumeyer, chief executive officer of First Majestic, the top stock in Canada and among its global peers this year. “I think we’ll see three-digit silver,” he said, predicting the metal could surge to $140 an ounce by as early as 2019.
That’s a bold forecast. While silver has rallied 19 percent this year to leapfrog gold as the best-performing precious metal, it settled lower Wednesday at $16.26 an ounce on the Comex in New York and reached a record of just under $50 in 2011. The highest projection among analysts surveyed by Bloomberg is $57 an ounce in 2019.
“That seems aggressive,” Dan Denbow, a portfolio manager at the USAA Precious Metals & Minerals Fund in San Antonio, said by e-mail. “There has been a lack of investment in silver exploration, but with significantly higher prices you will get new supplies. The current cost curve wouldn’t support that price.”
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Still, there are other optimistic signs for silver rising. Hedge funds expanded their bullish bets on the metal to an all-time high earlier this month. Because the commodity holds appeal both as a store of value as well as for its multiple industrial uses, it surged earlier this year on speculation that the pace of U.S. interest-rate hikes will slow and that Chinese manufacturing may be improving.
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