Here’s Why We’ve Lowered Our Price Estimate For Silver Wheaton To $22
Silver and gold prices have dipped considerably after the elevated levels seen in the third quarter. For example, London PM Fix gold prices have averaged roughly 6% lower in Q4 so far as compared to Q3. [1] Macroeconomic uncertainty in the wake of the UK’s June 23 EU referendum and concerns over slowing global economic growth boosted the safe-haven investment demand for precious metals in Q3, driving up prices. However, two factors have primarily driven prices lower since then — strengthening expectations of an interest rate hike by the Fed and the implications of the outcome of the U.S. presidential election.
The Federal Reserve is widely expected to raise interest rates in December, in the light of the steady improvement in U.S. employment data. [2] An increase in interest rates tends to lower gold prices as investors shift towards interest-linked securities. Moreover, strengthening economic conditions shift investor interest towards other asset classes such as equities. As per the IMF World Economic Outlook, U.S. economic growth is expected to pick up to 2.2% in 2017 from 1.6% in 2016. [3] In addition to an improving economic outlook for the U.S., the outcome of last week’s presidential election has been viewed favorably by the markets. Though the specifics of President-elect Trump’s economic policies are unclear at the moment, promises such as lower corporate tax rates could boost economic activity going forward. [4] A surge in the stock markets has been accompanied by a decline in precious metal prices. As a result, we have lowered our forecasts for gold and silver prices and have suitably modified our margin estimates as well. The following graphs illustrate our revised gold and silver pricing forecasts.
Changes to our expectations for gold and silver prices in the light of the changed outlook for precious metal prices have translated into our new price estimate for Silver Wheaton.
Have more questions about Silver Wheaton? See the links below.
- What Is Silver Wheaton’s Revenue And EBITDA Breakdown?
- What Is Silver Wheaton’s Fundamental Value Based On Expected 2015 Results?
- How Has Silver Wheaton’s Revenue Composition Changed Over The Last 4 Years?
- By What Percentage Did Silver Wheaton’s Revenue & EBITDA Decline In The Last 4 Years?
- By What Percentage Can Silver Wheaton’s Revenue & EBITDA Grow In The Next 3 Years?
- By What Percentage Will Silver Wheaton’s Silver Equivalent Production Increase If Production Commences At The Pascua-Lama Mine?
- How Will Silver Wheaton’s Revenue Composition Change Over The Next 5 Years?
- How Do Silver Wheaton’s Margins Compare With Those Of Traditional Precious Metal Mining Companies?
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Notes:
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Notes:
- Historical Gold Prices, Kitco [↩]
- U.S. unemployment falls to 4.9% before election, CNN Money [↩]
- World Economic Outlook, IMF [↩]
- Trump is turbocharging the stock market’s V-shaped surge, Market Watch [↩]