Global demand for silver is on the rise and is expected to hit a record high this year, giving investors the opportunity to buy the metal at prices that have changed little over the past six months.
“A compelling argument can be made that 2022 will be a good year for silver,” says Edmund Moy, former director of the United States Mint and senior IRA strategist for gold and silver trader US Money Reserve. . “As the global economy recovers from the pandemic, expect to see increased demand for silver from the industrial sector.”
““A compelling argument can be made that 2022 will be a good year for silver.” ”
Total global demand for silver is expected to climb 8% to a record high of 1.112 billion ounces this year, according to the Silver Institute.
Based in part on analysis by precious metals research consultancy Metals Focus, the Silver Institute said the “exceptionally bright” outlook for silver demand is driven by record industrial silver manufacturing. , which includes electrical and electronic applications, as well as green technologies.
The Silver Institute predicts 5% growth this year for global industrial silver demand to a new high of 552 million ounces.
Industrial demand accounts for half of the total demand for silver and is expected to be responsible for about half of the price movement, says Robert Minter, director of ETF investment strategy at asset manager abrdn. The other half of demand comes from jewelry and investment, where the drivers are similar to gold, he says.
“Due to demand sources, silver can be considered half gold, half copper,” says Minter. “Yet when we compared returns since the end of 2020, copper is up 28%, gold down 2% and silver down 12%.” This implies that silver prices should be much higher, he says.
For silver to catch up to just half the performance of copper, that would imply a silver price near $25.50 an ounce, Minter says. On February 16, SIH22 silver futures,
settled at $23,605.
Michael Cuggino, president and portfolio manager of the Permanent Portfolio family of funds, believes that 2021 has served as a “basement and consolidation year” that provides a “good entry point for a long-term investor” into the world. silver or gold, which saw prices fall last year as inflation began to emerge, but has been “explained as transitory”.
Still, silver futures have generally been stuck in a trading range below $5 an ounce since August.
Likely triggers for a breakout move this year include geopolitical and currency concerns, inflation concerns and growing demand for silver, Cuggino says.
Demand is expected to come from both traditional and cyclical businesses, as well as emerging green industries, providing a “strong long-term demand picture for industrial use,” he says.
The Silver Institute, meanwhile, also expects investment demand for physical silver to increase by 10% in 2022 to 290 million ounces, according to Michael DiRienzo, the institute’s executive director.
Investors are already buying silver. Moy points out that sales of American Eagle one ounce silver coins at the U.S. Mint soared from a pre-pandemic level of 14.9 million in 2019 to 28.3 million last year.
Silver mining stocks and exchange-traded funds also have a place in a savvy investor’s “toolbox, but owning the physical metal gives the investor a tangible asset without having to consider management.” , he said.
If inflation remains “high and persistent, expect more investors to cover their portfolios with cash,” Moy says, and those looking to mine stocks, ETFs, or own physical metal will have to decide what works best in their portfolio.
“Stocks and ETFs are convenient, but their performance depends on more than spot prices,” and when it comes to ownership of the physical metal, storage and portability are major concerns, he says.