Silver prices have been little moved in months, although global silver demand looks set to hit a record this year
Global demand for silver is rising and is expected to hit a record this year, giving investors an opportunity to buy the metal at prices that have changed little over the past six months.
“It can be convincingly argued 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, silver demand from the industrial sector can be expected to increase.”
““A compelling argument can be made that 2022 will be a good year for silver.” ”
According to the Silver Institute, global silver demand is expected to rise 8% this year to a record high of 1.112 billion ounces.
Based in part on analysis by precious metals research consultancy Metals Focus, the Silver Institute said the “extraordinarily encouraging” silver demand outlook is being driven by record silver industrial production, which includes electrical and electronic applications as well as green technologies.
The Silver Institute is forecasting global industrial silver demand to grow 5% this year to a new high of 552 million ounces.
Industrial demand accounts for half of overall silver demand and is likely to account for about half of the price action, says Robert Minter, director of ETF investment strategy at asset manager abrdn. The other half of the demand comes from jewelry uses and investing, where the drivers are similar to gold, he says.
“You can think of silver as half gold and half copper because of the sources of demand,” says Minter. “Yet when we compared returns since the end of 2020, copper is up 28%, gold is down 2% and silver is down 12%.” That implies silver prices should be much higher, he says.
If silver caught up to half the performance of copper, that would mean a silver price of almost $25.50 an ounce, says Minter. On February 16, silver futures SIH22,
priced at $23.605.
Michael Cuggino, President and Portfolio Manager of the Permanent Portfolio Family of Funds, believes 2021 served as a “baseline and consolidation year” offering a “good entry point for a long-term investor” in either silver or gold, both of which saw prices fall last year, but was “declared temporary” when inflation hit.
Still, silver futures have generally been stuck in a trading range of less than $5 an ounce since August.
Likely triggers for a breakout this year include geopolitical and monetary concerns, inflation concerns and silver demand growth, says Cuggino.
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 10% to 290 million ounces in 2022, 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 US Mint rose 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 their place in a “savvy investor’s toolbox, but owning the physical metal gives the investor a tangible asset without having to consider management,” he says.
If inflation “remains high and sustained, expect more investors to hedge their portfolios with some silver,” Moy says, and those looking for mining stocks, ETFs, or owning the physical metal will need to decide what’s worth investing in in their portfolio works best.
“Stocks and ETFs are convenient, but their performance depends on more than just spot prices,” and when it comes to owning the physical metal, storage and portability are the top concerns, he says.