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Gold is not always available to the average investor because of its high cost. At the time of this writing, the world price of a troy ounce of the yellow metal was within $1,837 – given the specifics of the local market, such a purchase for our citizens will cost even more.
In this situation, you can consider investing in silver.
Why should you add silver to your portfolio?
On international markets, silver largely repeats the behavior of gold, but it is much more affordable. This type of investment is quite widespread among our citizens, as an investment for a “rainy day”. In the form of silver coins of the same National Bank or other countries, and in the form of ingots. So let’s talk about the global outlook for silver this year.
What events will the price react to?
Since the start of the pandemic, silver soared to $28.1 an ounce. After which it gradually became cheaper, periodically returning to peak levels ($28 or more per ounce) in mid-2021. A new jump in prices for the white precious metal was recorded in January-February 2022, when it rose sharply after gold amid the threat of war in Ukraine.
Silver price in international markets ($)
The tightening of the Fed’s policy, new outbreaks of coronavirus in China, as well as the ongoing war in Ukraine, provoked a gradual decline in the price of silver to $18. Now, after a sharp rise in early 2023, the metal is trading at around $22 an ounce. Given the relative cheapness of silver, most investors can afford to invest in it, which makes it so popular among ordinary citizens of many countries.
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The key factors in determining the world price of silver now are:
The policy of the US Federal Reserve in terms of interest rates: the higher they are, the greater the interest of investors in the dollar, which works against the rise in prices for all precious metals, including silver. Industrial consumption of silver and numismatics.
As noted in a recent market survey by The Silver Institute, this year the white precious metal should reach a new high in industrial use – the most important category in the field of demand. “After industrial silver consumption reached record levels in 2021 and 2022, a further increase of 2.6% to 550 million ounces is expected in 2023,” the review said. Demand grew especially strongly in the “green” energy and jewelry industries.
Silver is a key element for solar panels, each of which uses about 20 grams of this metal. In particular, the Inflation Reduction Act passed last August in the United States stipulates spending of about $430 billion to encourage investment in renewable energy sources. Europe is taking similar measures.
Jewelry, auto and photographic industries, as well as numismatics are not far behind. Taken together, this has already led to a 16% increase in demand for physical silver in 2022 (to 1.21 billion ounces) and a shortage of approximately 194 million ounces in 2022. For comparison: a year earlier, the deficit was 48 million ounces.
The production of solar panels alone accounts for about 10% of the total metal demand.
For a general understanding of the situation with silver, here are a few numbers
According to the Silver Institute, the demand for this metal for the production of electric vehicles will grow to 70 million ounces by 2030. Sales of silver coins and bars have already increased by 36% in 2021 to 278.7 million ounces, decent growth has continued and in 2022.
Interestingly, silver bars and coins are bought the most in the USA, India and Germany. The jump in demand is explained by the fact that investors want to protect their capital from inflation, a possible recession and global instability.
In addition, there is also the specificity of the Indian market. In this country, the demand for silver almost doubled in 2022, as many citizens were more active in buying silver jewelry and cutlery during the situational decline in the price of silver in rupees.
Thus, potentially until the beginning of 2030, industrial demand for silver will support its value, provoking a periodic surge in prices, depending on the needs of a particular industry.
Also, price jumps will provide geopolitical exacerbations: in times of crisis, some investors will buy physical silver in the form of bars and investment coins in the same way as physical gold.