Silver is expected to shine this year, on the back of a positive spill-over from gains in gold, with the yellow metal continuing to benefit from macroeconomic and geopolitical uncertainties across critical economies.
Washington-based Silver Institute is forecasting a silver price gain of 13% to average the year at $18.40/oz.
Last year, silver recorded a 4% increase in the average price to $16.21/oz, which was the first yearly price increase in four years.
In its 2020 market outlook, the organisation’s analysts say that while investors will remain net buyers of silver overall – a development that should lift prices higher – there will also be times when silver will have to contend with issues, such as the current health crisis in China.
Growth in silver industrial offtake, accounting for over half of total demand in 2019, is expected to resume in 2020, reversing two years of marginal losses. While weak economic conditions, particularly in China, remain a headwind to industrial output, the Silver Institute says a repeat of last year’s destocking along the supply chain is unlikely. The refilling of this pipeline should offer an additional boost to demand this year.
Silver industrial demand is forecast to grow by 3%, which is broadly in line with the International Monetary Fund’s forecast of 3.3% for global gross domestic product growth this year. Demand from the electrical and electronics sector should account for the bulk of the gains.
Silver mine production is forecast to grow by 2% in 2020, which will be the first yearly increase in five years. The growth is partly owing to the contribution from several recently commissioned mining operations and from the ramp-up of several mine expansions to full production. Silver scrap supply is also projected to rise for the fourth consecutive year, albeit by a small amount.
The Silver Institute says the market is expected to end this year with a structural surplus of about 15-million ounces. At that level, the surplus would be the lowest in five years.
Concerns about the state of the global economy will have negative consequences for industrial metals, and by extension silver; 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.