Silver

Price Trends

Historically, silver was considered a safe haven asset that generally fares well in times of turmoil, and the past year has been packed with tense political events — not to mention the coronavirus pandemic and the resulting global economic impact. Many investors are confused by the silver price movement from June 2020 to June 2021 alone; silver price levels range from US$ 17/oz to US$ 29.50/oz. The price of silver jumped significantly since the start of 2020 compared to the year before mainly due to increased investment interest and not increased end-user demand. Sizeable investments were recorded both from institutional and retail investors that increased their silver holdings to over one billion ounces for the first time. In late January and the beginning of February, silver saw an attempt from Reddit investors to squeeze the price of silver. This initially pushed the price of silver above $30, for the first time since 2013, but shortly after it retreated.

Forecast:

According to the World Silver Survey 2021 strong growth in silver mine production this year is expected to be followed by continued growth in the medium term. It will be driven by increased output from a number of major operating mines alongside new projects, with a significant contribution coming from primary silver operations in Mexico. Recycling looks likely to fall in 2022 and for the next few years after due to jewelry and silverware scrap’s reaction to falling prices.

Silver demand should enjoy solid growth from 2022 onwards from the post-COVID re-opening of economies. Silver’s end-use in the automotive arena should grow fast, for example, as vehicle output bounces back and as we see a surge for electric vehicles, which have a much higher silver loading than conventional vehicles. The proliferation of 5G devices and networks will also act as a useful boost, as could induction chargers and cold sintering powders. 

Physical investment in silver is hard to forecast as various markets could see contrasting rates of profit taking and bargain hunting in reaction to price moves. However, according to the World Silver Survey 2021, no structural changes are expected in silver market balance in either of its core US and Indian markets that might threaten net investor purchases. Jewelry demand has a clearer path to steady gains looking ahead as economic activity normalizes and growth should flow through medium easing in silver prices. Western sales of branded items also show promise, as does India through the rising popularity of sterling silver among organized retailers. Increases for silverware led by India and driven by softer prices are also expected in the next few years, with no structural change on the horizon as a major threat.

According to Heraeus, silver is likely to outperform gold again in 2021 and is expected to be trading at a range between $21/oz to $36/oz. The silver is, as of writing, trading at $28.26/oz. Industrial demand should be more robust in 2021, and with the current low or negative real interest rate, we should see a healthy investment demand for silver to continue in 2021 and the foreseeable future. 

The global silver demand is expected to reach 1,155 million ounces in 2025, growing at a CAGR of 2.98%, for the time period of 2021-2025 according to the Global Silver Market Report. While the silver supply is likely to be recorded as 1,062 million ounces in 2025, increasing at a CAGR of 1.26%, during 2021-2025. Factors such as rising sales of jewellery & silverware, growing demand for solar photovoltaic, rising use of silver oxide batteries, increasing manufacturing of electrical equipment, and expansion of dental services will drive the growth of the market. However, the market growth could be challenged by volatile prices of silver and the environmental impact of silver nanoparticles. A few notable trends may include rising use of silver in the auto industry, growing consumption of silver nanoparticles and upsurge in the silver consumption in the U.S