Silver Set to Record Record Physical Demand of 1.112 Billion Ounces in 2022 – Silver Institute

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(Kitco News) – Record physical demand for silver in 2022 may not be enough to propel prices significantly higher this year as the precious metals sector continues to suffer from rising expectations that central banks will tighten monetary policy aggressively in order to to combat the rising risk of inflation.

On Wednesday, the Silver Institute released a report saying it expects physical silver demand to hit a record high of 1.112 billion ounces this year, up 8% from solid 2021 levels.

The report said silver demand is expected to be broad-based. However, many analysts continue to watch silver’s industrial component as the world develops green energy.

“The ongoing improvements in the global economy will provide an additional boost to silver’s industrial applications and mitigate near-term headwinds from supply chain shortages and challenges in certain regions from the ongoing COVID pandemic,” the Silver Institute said. “The prospects for the use of silver in the photovoltaic (PV) industry remain good. Government commitments to carbon neutrality have led to a rapid expansion of green energy projects. As a result, despite ongoing efforts to reduce silver pollution, record high PV installations are expected to push silver demand in this segment to an all-time high in 2022.”

Investment interest in silver should be robust again this year. The Silver Institute said it forecasts demand for silver bars and coins to rise 13% in 2022, marking a seven-year high.

Meanwhile, the Perth Mint announced on Wednesday that it sold more than 2.3 million ounces of silver in January, a record.

“Throughout the year, ongoing macroeconomic uncertainties and elevated inflationary pressures should encourage retail investors to seek physical silver for wealth preservation. Accordingly, profit-taking is likely to remain muted,” the analysts said.

Demand for silver coins has already got off to a solid start after the US Mint said it sold 5 million ounces of the precious metal in January, its best start to the year since 2017.

While robust demand is expected for the market, the price outlook remains subdued as the precious metal faces policy headwinds.

“Macroeconomic and geopolitical conditions will generally support precious metals prices in the first half of this year. However, once the pace of US interest rate hikes becomes more apparent, the price outlook becomes more difficult,” the Silver Institute said.

The Silver Institute said it expects silver prices to average $24.80 an ounce for the year, down 1% from the 2021 average price of $25.14 an ounce.

Commerzbank said that while the latest report from the Silver Institute brings silver investors some good news, it won’t be enough to support silver prices. Deutsche Bank said silver prices should be dragged lower by gold as the Federal Reserve plans to aggressively raise interest rates starting next month.

“We expect a price of USD 24 per troy ounce by the end of the year (previous forecast: USD 26). We have also revised our forecast for 2023 slightly downwards to $27,” said Daniel Briesemann, precious metals analyst at Commerzbank, in a statement published on Thursday.

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