A new report from Metals Focus, an independent precious metals consultancy, predicts that silver is likely to see further gains in 2016, though these are likely to be more modest than those seen in the early part of the year. This assessment was presented in a release accompanying the announcement of the release of Silver Focus 2016, the consultancy’s flagship annual report on the silver market.

Philip Newman, Director of Metals Focus said that the market could see a fourth quarter average at a little over $17, with a peak of $19.20 by end-2016. Currently, the intra-year gain for the metal in the first five months of the year stands at a very impressive 16%, the statement said. This surge has been spurred by a major change in market expectations regarding the number of US interest rate rises this year and the implications of this for the dollar. Initially, gold was the sole beneficiary of this market sentiment, with silver held back by fears about the Chinese and global economic outlook. Subsequently, the traditional close correlation between the two metals re-asserted itself, the report added.

While assuming that ultra-loose monetary policies in the US, the proliferation of negative policy rates elsewhere and rising market turbulence remain in place, Newman however cautioned that given the scale of “hot money” inflows into silver so far this year, the path will not be smooth.

The Metals Focus report stated that there was unlikely to be major changes in ETF holdings in the second half of the year, and supply/demand fundamentals were expected to remain generally supportive, but only at the margin.

“This will mean silver’s destiny over the rest of the year will remain tied to investment, and especially professional activity.” Philip concluded, “this creates risks for further liquidations in the near-term, although such corrections should both be limited and short-lived”.