According to leading analysts, the price of silver is set to fall this year. It could average about 5% less than last year’s highest price. The supply of silver in 2021 lagged behind the industrial use of the precious metal. It was the first time since 2015 that there was a silver deficit in the market. The same analysts believe that this could be the start of a structural change as deficits continue. By all accounts, investors are being encouraged to buy silver bullion.
The price of silver rose by 22% in 2021 averaging $25.14 an ounce hitting $30 in January 2021 because private investors on “Reddit” used social media to promote a #silversqueeze urging people to buy silver. The total demand for silver surged to $1,05 billion ounces, for the first time in 2015. Silver and gold last grew together in 1997.
The surge was boosted by the post-COVID recovery and the economic and industrial activities that happened to boost the rapid expansion of industries so people in key industries could continue their business. The rapid surge was further spurred on by global economic and industrial activity including the rapid expansion of solar panel installation. Jewellery and other silver products posted healthy gains as the economy reopened and economic sentiment grew more positive.
Most of the silver supply came mainly from central and South America. Mexico produced an impressive 200 million ounces the highest amount it had ever reached. It is expected to produce even more in 2022.
With silver recycling businesses doing more, the total supply of silver is forecasted to grow by at least 3% this year.
According to the Silver Institute, world events that create uncertainty about the supply of silver like the Russia/ Ukraine war can create demand for both industrial silver as well as investment-grade silver.
Looking at the upsides, the concern is more about what institutional investors will do. An increase in demand is likely to drive the price of silver even higher.
Russia’s invasion of Ukraine has already caused the price of silver to rise up to $27 in March. The high price was also spurred on by the sharp volatility of financial and the commodity markets. The price is still high which means that investors will continue its upward trajectory especially if tragedies continue to follow one after the other as they have been from 2015 until now. The prospect of interest rates going even higher is likely to keep pushing the price of silver even further and with investor sentiment turning more towards precious metals market. People who buy silver bullion turn to metals like silver for various reasons but they all have one thing in common with other investment assets: a need to engage in effective active strategies.
With central banks set to raise interest rates and inflation rising, silver investors are expected to emerge victoriously. Silver has proven throughout history to be a very reliable asset and the robust demand for this metal will further strengthen the market in general.