What’s Going on in the Silver Market?

Gold has been in the spotlight in recent months with the economic chaos caused by the coronavirus pandemic and governments’ response. Peter Schiff called gold a “no-brainer” investment. But silver is worth paying attention to as well.

The Silver Institute has released its World Silver Survey 2020 report featuring a detailed overview of last year’s silver market and a look ahead as we move through the current year.

Silver demand was up overall in 2019, pushed higher by a significant spike in silver investment. Meanwhile, supply dropped for the fourth consecutive year.

Overall demand nudged up by 0.4% despite the ongoing trade war’s impact on industrial output. Even with trade war disruptions, silver industrial demand proved to be resilient, slipping by just 0.1% last year. Several key segments of silver industrial fabrication even expanded. For instance, silver use in the solar industry grew by 7% to its second-highest annual level.

Investor demand was the biggest driver in the silver market. Global silver investment jumped 12% to 186.1 million ounces (Moz). This represented the largest annual growth since 2015.

Money-managers’ net positions in Comex futures went from being short over much of 2018 to consistently positive in the second half of 2019. Silver coin sales charted a 13% increase year-on-year, rising to 97.9 Moz. Silver bar demand remained solid at 88.2 Moz.

The price of silver rose to a three-year high of $19.65 last September.

Silver jewelry demand fell by about 1% in 2019, primarily due to soft demand in India and China.

On the supply side, global mine production fell for the fourth consecutive year by 1.3% to 836.5 Moz. Primary silver production declined by 3.8%  in 2019 to 240 Moz.

The coronavirus pandemic and the ensuing global economic shutdown make projecting the 2020 silver market difficult.

According to the report, due to the difficulties currently facing the global economy, key areas of silver demand — including industrial fabrication and jewelry and silverware offtake — will likely fall this year.

Mine supply is expected to continue its decline given the temporary shutdown of mining operations in several significant silver mining countries in early 2020.

On the bright side, silver physical investment is forecast to extend its gains this year, with a projected 16% rise to a five-year high as investors rotate out of equities in search of safe haven vehicles.

Metals Focus researched and produced the World Silver Survey 2020. It forecasts that silver will outperform gold later in the year.

As we have reported, the silver-gold ratio is at a historically high spread. Practically speaking, this signals that silver is extremely undervalued compared to gold. Last summer, we talked about how out-of-wack the silver-gold ratio was. We called it “silver on sale.” At the time, the ratio had pushed to about 93-1. In other words, it took 93 ounces of silver to buy an ounce of gold.

Today, the silver-gold ratio is 112-1.

At its core, silver is a monetary metal. It tends to track with gold over time. And it has historically outperformed gold in a gold bull market.