Silver Expected to Shine in 2020

Silver will shine in 2020 with higher prices supported by expanded physical investment and industrial demand.

This is the projection of the Silver Institute in its 2020 Market Forecast.

The Silver Institute believes that macroeconomic and geopolitical conditions will remain broadly supportive for precious metals, encouraging investors to stay net buyers of silver overall, a development that should lift silver prices higher this year. Additionally, we see continued growth in physical silver investment, and forecast silver’s use as an industrial metal will rise in 2020.”

Last year, the price of silver was up about 4%. This marked the first increase in four years. The price was underpinned by loose central bank monetary policy. According to the Silver Institute, the silver bull market will continue this year with the annual average price projected to rise by 13% to a 6-year high of $18.40.

This rally is premised mainly on a positive spill-over from gains in gold, as the yellow metal will continue to benefit from macroeconomic and geopolitical uncertainties across critical economies. Concerns about the state of the global economy will have possible negative consequences for the industrial metals, and by extension, silver. However, the weight of institutional money flowing into a relatively small market should prove sufficient for silver to outperform gold, and could cause the gold:silver ratio to drop to the mid to high-70s later this year.”

Currently, the silver-gold ratio is historically high.

The Silver Institute expects industrial offtake to resume in 2020, reversing two years of marginal losses. The institute projects a 3% increase in industrial demand. Industrial use accounted for about half of the silver demand last year. Demand from the electrical and electronics sector should account for the bulk of the gains.

Global jewelry demand is forecast to maintain modest growth in 2020. India serves as the primary driver for silver jewelry demand. US silver jewelry consumption should also remain healthy, thanks to stronger online sales.

Holdings in silver exchange-traded products will likely remain elevated. Investor demand for precious metals has been high, with gold holdings in ETFs reaching record levels in January. According to the Silver Institute, profit-taking in silver ETPs is likely to be limited, even with a price rally.

These holdings tend to be relatively sticky, which reflects the importance of retail investors in this market, who often adopt a longer investment horizon than many short-term professional investors. Meanwhile, continued macroeconomic uncertainties should also favor safe-haven assets, which will encourage new allocations into silver ETPs.”

Investment in physical silver, including silver bars and silver coins, is expected to increase for the third year in a row. The Silver Institute projects about a 7% increase in physical silver demand in 2020.

On the supply side, silver mine output is projected to increase by about 2%. This would be the first increase in silver mine output in five years. This growth will be partly due to the contribution from several recently commissioned mining operations and from the ramp-up of several mine expansions to full production.