Since the beginning of the year, amid the fight against the pandemic, investors have been looking for security, including in ETPs – silver-backed exchange-traded products, and have nearly tripled their savings in silver in nine months compared to the same period in 2019. The first three quarters also showed a “good appetite” for investment in silver coins and bullion.
Overall, this reflects the role of silver as a safe haven asset, and some investors expect silver to outperform gold this year, according to The Silver Institute.
In particular, only during the third quarter of 2020, the total world stocks of silver in exchange-traded products showed an almost threefold increase compared to the same quarter of 2019: 297 million ounces versus 103 million ounces. Investments in ETP at the end of September were 1.026 billion ounces, which is slightly below the maximum recorded in August – 1.052 billion ounces. But the influx into the global reserves of ETP continues, so on October 12, their reserves were already 1.045 billion ounces.
Global demand for silver bullion coins has grown by 65% since the beginning of the year. This was mainly driven by sales in two key precious metals markets – the US and Germany, which saw double-digit gains in nine months.
Investments in silver bars were also the highest in the United States and Germany. But this growth was partially offset by weaker demand in India, especially in recent months, when sales began.
Industrial and jewelry demand
In the third quarter, there were signs of a recovery in global industrial demand, and in October the trend gained momentum as several key economies emerged from the quarantine measures that were being applied to counter the spread of COVID-19.
However, the impact of the pandemic will not be completely avoided, and by the end of the year, industrial demand for silver will decline by about 10% compared to a year earlier.
“If you look at the sector more closely, this year silver is more actively used in photovoltaic systems. In the first half of the year, due to isolation measures, some projects were postponed, but in the second half, many of them returned to implementation. , due to low sales, production decreased, and, as a result, the production of silver-containing electronics decreased, “the Silver Institute experts note.
Unsurprisingly, the pandemic continues to stifle global jewelry demand, which is expected to fall by about 20% this year, possibly the lowest since 2012. The decline is widespread, but most significant in India and East Asia.
Silver price in 2020
The macroeconomic background is likely to support investment demand for silver until the end of 2020. Strong monetary easing and fiscal stimulus measures in several key economies, and perhaps again in the US, could raise inflation expectations and lower the dollar, thereby increasing the attractiveness of safe assets, including precious metals.
More importantly, if the price of gold picks up again later this year, silver’s high beta bond to it will spur aggressive tactical buying. And this could lead to the fact that the price of silver will again return to the level of $ 30 per ounce, and the ratio of gold and silver will approach the level of 70: 1 against the current 80 (on October 15).
According to the April estimates of experts from Metals Focus and the Silver Institute, silver supply by the end of 2020 may decrease by 4% to 978 million ounces, demand – by 3% to 963 million ounces, and the surplus in the precious metal market will be halved to 14.7 million ounces. from 31.3 Moz in 2019.
Gold Miner Bulletin