The Silver Institute’s Interim Silver Market Review Is Out

The Silver Institute (SI) released its Interim Silver Market Review, featuring historical supply and demand statistics and provisional estimates for 2020. Physical silver investment is expected to surge to a five-year high, even when the COVID-19 outbreak affected global demand and mine supply. Mexico, the world’s top silver producer, is poised to benefit from these trends.

The report expects physical investment in the white metal to surge by 27 percent to 236.8Moz in 2020. The US, considered the largest retail market for bars and coins, will lead the way with a projected 62 percent gain. This reflects the impact of increased price volatility and healthy price expectations, reported SI.

The report highlights the strength of silver-backed exchange-traded product (ETP) demand during 2020. From the beginning of the year until Nov. 13, gains have reached 326Moz. As a result, global holdings have for the first time surpassed 1 billion oz. For the entire year, the forecast is an increase of 350Moz on end-2019 levels, which compares favorably with a rise last year of 81.7Moz, SI notes.

Silver mine production is expected to fall by 6.3 percent in 2020 to 780.1Moz. This reflects COVID-19 lockdowns implemented by several major silver producers, including Mexico, during the first half of the year, which required mines to temporarily halt production, the report explains. Even when most mines are back in production, new outbreaks may impact supply in the future.

The pandemic also impacted silver demand, especially during March and April, the report says. Although demand has recovered since then, most areas are still on track for heavy full year losses. Industrial fabrication, for example, is forecast to drop by 9 percent this year to 466.5Moz, a five-year low. SI explains that this reflects the impact of lockdown restrictions, with supply chains heavily disrupted, end-users adopting an increasingly cautious approach to inventory replenishment and factories facing labor supply problems.

The report concludes that the global silver market is forecast to see another physical surplus in 2020 of 31.5Moz, the highest in three years. This compares with 26Moz in 2019 and represents the fifth uninterrupted annual surplus in the silver market. Even so, the strength of global silver investment is expected to continue comfortably absorbing this surplus, SI adds.

It is expected that investors keep turning to silver as a safe haven asset during 2021. “There are concerns around government-backed money because governments can hit the money print button whenever it suits them, which ultimately results in the devaluation of their currencies. On the other hand, precious metals stand for discipline in the sense that a specific quantity of money can be created. Gold or silver has to be physically mined out of the ground and cannot be printed at random,” said Gijsbert Groenewegen, Founder of Silver Arrow Partners, during an interview with Mexico Business News.