Silver Institute Optimistic on Prices for 2020By MBN Staff | Wed, 04/22/2020 - 18:47
The Silver Institute, a nonprofit international organization of silver industry companies, has published the 2020 edition of its World Silver Survey. The document takes a look at the metal’s supply and demand in 2019 and offers an outlook for 2020.
The survey begins questioning why silver, widely considered a safe-haven asset, has behaved as other pro-cyclical assets during the COVID-19 crisis. Focusing on silver’s fundamentals, the document points out that “silver saw a market surplus in 2019 of 31.3 million oz. The fourth surplus in a row, this only added to earlier gains in global above-ground stocks. The year saw producers shift from net de-hedging to hedging, resulting in overall supply rising at the margin.” On the demand side of the metal’s fundamentals, the Silver Institute goes on to explain that demand practically remained unchanged in 2019. “We recorded healthy gains in physical investment and demand from the photovoltaic industry, as well as smaller increases seen in our other industrial category. However, these were largely offset by losses elsewhere in electrical and electronics applications, silverware and jewelry.” The fact that silver prices are lagging so far behind those of gold during the COVID-19 outbreak can be partially explained by years of industrial oversupply. More than 50 percent of the metal’s demand comes from different industries.
In its outlook for the remainder of 2020, the Silver Institute is cautiously optimistic. It points out that “roughly 80 percent of silver’s demand comes from areas likely to suffer as a result of the COVID-19 crisis.” The document adds that “while we expect physical investment to grow (and indeed accelerate), all other demand areas are forecast to suffer losses this year.” On the other hand, the Silver Institute expects “sizable declines for supply.” This is due to the fact that roughly 50 percent of silver miners are currently offline as a result of pandemic-related temporary closures and ramp-downs.
The Silver Institute’s conclusion regarding prices over the rest of 2020 is constructive: “We expect physical investment to enjoy strong growth. Importantly, we also believe that professional investor interest in silver will improve considerably in the months to come, as confidence that gold is once again in a sustainable bull market grows and silver’s historical undervaluation makes it look yet more attractive.”