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The macroeconomic and geopolitical situation remains favourable for precious metals this year. That's what it writes Silver Institute in a preview of the silver market in 2020. The organization expects both industrial demand for silver and investor interest in silver to strengthen. Also, many manufacturers who have reduced their stock in the past year will replenish it. Especially in the electronics sector and the automotive industry, the demand for silver will increase this year, according to the Silver Institute.
The market for solar panels, on the other hand, shows a mixed picture. Over the past decade, this market has grown to a size of 100 million troy ounces of silver on an annual basis, but the growth seems to have slowed down since 2017. The demand for solar panels is still increasing, but manufacturers are compensating by using less and less silver in their panels. The Silver Institute therefore expects the total demand for silver for solar panels to stabilize or decrease in the coming years.
Silver is a precious metal with many industrial uses, as half of the annual supply is used for this purpose. The remainder is traded as an investment object, for example in the form of Silver Coins and silver bars. The Silver price thus responds not only to changes in industrial demand, but also to changes in investment demand. This makes silver more volatile than, for example, gold, whose industrial component is relatively small.
In the past year, the price of silver has risen again, but the precious metal lags behind gold. At the time of writing, a troy ounce of silver is almost 90 times cheaper than a troy ounce of gold. As a result, silver is currently historically undervalued. According to the Silver Institute, sentiment in the silver market seems to be picking up again after a number of lean years. They expect the demand for physical investment silver to rise for the third year in a row this year. As a result, the surplus in the silver market will decrease, the Silver Institute concludes.
The average silver price in 2019 was higher than in the previous year for the first time in four years. Lower interest rates and new monetary stimulus have led investors to seek refuge in precious metals. Silver price rose by 15.5% in the past year, and the Silver Institute expects the price to increase by another 13% this year. For this year, an average price of $18.40 per troy ounce is expected, the highest level in six years. On 15 April, the Silver Institute will publish its annual report on the silver market, the World Silver Survey.
