Pandemic Fueled Renewed Investor Interest in Silver That Should Continue Through 2021
The coronavirus pandemic fueled significant growth in investment demand for silver in 2020. And according to the Silver Institute’s World Silver Survey 2021, demand is expected to remain robust through 2021.
The price of silver was up 27% on average last year on the back of a surge in investment demand. ETF inflows took global holding to over 1 billion ounces for the first time ever.
Demand for silver coins and silver bars was also robust, showing an 8% increase last year. Physical investment demand would likely have been even stronger if not for pandemic-related supply disruptions, causing sharply higher wholesale and retail premiums.
Silver-backed ETFs grew by a remarkable 331 million ounces last year, an increase of 298%. Silver-backed funds ended 2020 at 1.067 billion ounces.
While the pandemic helped drive investment demand for silver higher, industrial demand languished as governments worldwide shut down their economies. Overall, industrial silver demand fell by 5% to a five-year low of 486.8 million ounces. The one bright spot was silver demand in the solar energy sector, which was up by about 2%.
Jewelry demand dropped 26% and silverware demand tanked by 48%, primarily due to significant losses in India and pandemic-related shutdowns of retail stores and factories.
On the supply side, global mine production registered its fourth consecutive annual decline last year. It was the most significant drop of the last decade, falling by 5.9% to 784.4 million ounces. Again, the pandemic was a major factor, forcing many mines to shut down operations for periods of time.
Silver enjoyed a brief moment in the limelight earlier this year when the so-called “Reddit Raiders” turned their attention to the white metal. The spotlight has dimmed somewhat, but there are still plenty of reasons to be bullish on silver.
The hope of the Reddit Raiders was to create a short squeeze in the silver market by buying up physical metal. The price popped temporarily, but it appeared at the time the silver market was just too big for the Reddit investors to squeeze. The price has dropped back and the spotlight dimmed. COMEX activity in recent months reveals a short squeeze could still be in play, albeit in slow motion. But regardless, there are still plenty of more fundamental reasons to be bullish on silver.
The Silver Institute expects investment demand for physical silver to remain robust. Silver bars and coin demand expected to post their highest annual figure since 2015.
ETF inflows are unlikely to match last year’s levels but should remain historically high.
The biggest demand increases should come in the industrial sector as economies recover from last year. Industrial fabrication is forecast to increase by 8% to a record annual total, led by electrical and electronics offtake. This forecast pick-up in demand is predicated on a recovery in vehicle manufacturing, strong consumer electronics demand, and further gains from the solar sector. Jewelry and silverware demand should enjoy double-digit increases in 2021.
Mine production will likely rebound, but it remains unclear if the general downward trend in silver output we saw prior to the pandemic will reverse.
Continued loose Federal Reserve monetary policy could also boost the price of silver through the rest of 2021.
The Powerful Case for Silver report covers the fundamentals of the silver market and explains why investors should be bullish on silver in the long term. You can download the report free.
The report covers the following topics in detail.
- Supply and demand dynamics
- Growing industrial demand for silver
- The Federal Reserve’s monetary debasement
- Silver’s role as money
- What the silver-gold ratio is telling us
- How to buy silver and the products to avoid
This report makes the strong investment case for silver — a metal with the monetary benefits of gold paired with the industrial upside of other commodity metals.