Silver Institute: Brighter Days Ahead for White Metal

The silver price remains rangebound, stuck below US$18 an ounce, but the Silver Institute is forecasting that the white metal will make gains this year, propelled by interest in the safe haven asset class and increased use in the industrial sector.

In early January, gold’s sister metal benefited from the precious metals rally that came as international relations between the US and Iran hit a fever pitch.

However, the metal fell below US$18 on January 3 and has been unable to break past the US$17.80 threshold ever since.

While the Silver Institute is optimistic that silver will end up making gains in 2020, the group is cautious about the effect that the coronavirus — which has been renamed COVID-19 by the World Health Organization — is having on China’s economy and its industrial sector as a result.

“Growth in silver industrial offtake (accounting for just over half of total demand in 2019) is expected to resume in 2020, reversing two years of marginal losses,” reads the report. “While weak economic conditions, particularly in China, remain a headwind to industrial output, a repeat of last year’s de-stocking along the supply chain (as a result of the trade war) is unlikely.”

The Silver Institute is forecasting a 3 percent increase in silver demand for this calendar year. Interest in silver-focused exchange-traded funds is expected to remain high during the period, as will purchases of physical silver, which are estimated to rise for the third consecutive year, gaining 7 percent in 2020.

After five years of dwindling mine production, silver output is anticipated to climb by 2 percent as a result of newly commissioned mines and ramp ups at existing projects.

The Silver Institute expects there to be a 15 million ounce surplus at the end of the year.

“The outlook for silver remains positive, with the annual average price projected to rise by 13 percent to a six-year high of US$18.40 in 2020,” the report notes. “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.”

Ultimately, the group foresees the white metal outshining gold.

“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,” the Silver Institute explains.

The current price of silver is US$17.45.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.