Analysts argue that the global supply of silver mining production will increase in the medium term. Improvements and operational expansions overshadow the depletion of reserves. However, the forecasts for global recycling will be mixed.
On the demand side, increased battery and hybrid electric vehicles’ production will mean a higher silver load than traditional internal combustion engines.
Other areas that require drivers, such as 5G technology, are also promising for silver. The use of white metal for jewelry, silverware, coins, and bullion will remain stable. Meanwhile, photographic demand will continue to fall from an already diminished base.
Therefore, the supply and demand for the metal will probably balance in the coming years. In the short term, there is a margin of decline for the gold/silver ratio. This means that gold should go down, or silver should go up, or both.
Physical investment in silver could experience a third year of growth
In the medium term, as reserves are depleted, and base metal mining decreases due to the global slowdown, analysts think supply will be restricted.
In the long term, the growing fragility and partisanship of the United States government may result in financial mistakes, such as prolonged government shutdowns and loss of confidence in the US dollar.
The latest World Silver Survey, published by the Silver Institute and Metals Focus, indicates that the metal market experienced a general increase in global supply in 2019. However, it saw a 1% decrease in mine production. In 2020, analysts expect the mine production to drop 5% to 797 million ounces. Meanwhile, the overall supply is forecast to decrease by 4% to 978 million ounces. This would be the lowest level of global silver supply since 2009.
Regarding the demand for silver, the photovoltaic and electric vehicle markets contributed significantly to the increase in the consumption of precious metals in 2019. The photovoltaic demand registered an impressive growth of 7%, its second-highest annual level.
Last year, investor demand for silver recorded its most significant increase since 2015, rising 12% to 186.1 million ounces. Holdings in exchange-traded products experienced their most robust annual growth since 2010, increasing by 13% to 728.9 million ounces.
Looking ahead to 2020, physical investment in the metal, as well as silver coins and bars, could experience the third year of growth. It could rise by 16%, 215 million ounces.
Everything indicates that physical investment in silver will expand its earnings this year. There is an expected rise of 16% to five-year highs, as investors abandon the shares in search of safe-haven assets.
Melissa Pistilli, a precious metals analyst, agrees that many market observers believe the silver price is ready for a rebound.