Demand for silver increased sharply in first half of 2020

The demand for silver as an investment increased sharply in the first half of this year. That's what it writes Silver Institute in a new update. For example, the stocks of silver ETFs rose by 196 million troy ounces this year to a new record of 925 million troy ounces. Never before have investors added so many positions to silver ETFs in a single year, a trend we've seen in gold before. Silver investment coins were also in demand, as mints sold 60% more coins in the first half of this year than in the same period last year. The run on Silver Coins resulted in longer delivery times and higher premiums.

According to the Silver Institute, more investors are entering silver due to the extremely low interest rates and all the stimulus measures from central banks. Silver was also relatively cheap compared to gold in the first half of this year. For example, the ratio rose to a record 127 in March due to a sharp drop in the silver price. Never before have you received so much silver for your gold as an investor. By the end of June, this ratio had already fallen somewhat, to a level of 97.8. As a result, silver is still historically undervalued compared to the yellow precious metal.

Investors are getting into silver

In the first half of this year, investors mainly bought silver coins and ETFs. On the futures market, the demand for silver actually decreased, given the decline in the number of open contracts. At the end of June, speculators held 176 million troy ounces of long positions, down 40% from the end of December 2019. However, the number of open contracts rose in June, suggesting that more investors returned to the futures market in the past month.

The increased demand for investment silver is offset by a decrease in the demand for silver jewellery. Due to the lockdown measures, many jewellers had to close their doors, which means that the global demand for silver jewellery will be 7% lower this year. That's less than the expected 25% drop in demand this year for gold jewelry. The coronavirus is also having an effect on the production of silver mines, which is expected to be 7% lower than last year.

For the second half of this year, the Silver Institute anticipates a further increase in the demand for investment silver. Not only because of extremely low interest rates and monetary stimulus by central banks, but also because more investors will discover silver as the undervalued precious metal. The institute expects that the Silver Price This year will rise further to $21 per troy ounce, with the gold/silver ratio falling to 90. At the time of writing, the silver price stands at $18.76 per troy ounce and €533 per kilogram.

This contribution was made from Geotrendlines