In the first half of 2020, silver was actively bought by investors, which led to a 10 percent increase in investment demand. This has been fueled by strong interest in silver-backed exchange-traded products (ETPs), which have consistently posted several record highs since the beginning of the year along with solid investments in silver coins and bullion, according to The Silver Institute.
Until the end of June, the average silver price was $ 16.65 an ounce. In mid-March, it fell sharply, and then moved into positive territory, and by the end of June rose by 56% to $ 17.84 / ounce. In July, silver successfully overcame the $ 19 barrier, and against the background of the rally in gold rushed to $ 25, while gold – to $ 2,000 / ounce.
The gold to silver ratio (the number of ounces of silver needed to buy an ounce of gold) has declined from its multi-year high of “127” in March to “97.8” at the end of June. At the end of July, this ratio is around “80”, but by historical standards, it is still very high and may signal that silver is undervalued relative to gold.
Receipts from retail and institutional investors in silver ETPs have been impressive this year. As of June 30, global reserves of the metal in exchange-traded funds reached a new all-time high of 925 million ounces, representing approximately 14 months of production. ETP growth in the first half of 2020 by 196 Moz surpassed the highest annual inflow of 149 Moz recorded in 2009. North American funds accounted for about 90% of the inflows.
At the same time, retail sales of bullion grew by about 60% YoY. Bullion and coin sales rose in response to gloomy economic forecasts related to the global COVID-19 pandemic, which has already disrupted several links in the supply chain. This, in turn, led to the depletion of dealer inventories quickly, causing increased lead times and premiums.
The recovery in professional investor activity in May and June was reflected in the improved sentiment in relation to silver.
In China, the trading volumes of silver futures on the Shanghai Stock Exchange were the highest in May, and the turnover in gold has not decreased even after reaching record prices in March, as price dynamics and volatility fueled investor interest.
Industrial and jewelry demand
Unsurprisingly, COVID-19 negatively impacted silver consumption in the first half of the year. It was only in May, after a sharp contraction in March-April, that industrial demand for silver showed some signs of recovery as governments gradually began to lift restrictive measures. However, uncertainty about the future and a sharp rise in unemployment weighed down demand for end users in many sectors of the industry, such as automotive and consumer electronics.
In the future, some of these problems may be resolved by the flow of funds from recently announced government infrastructure programs, which will lead to increased demand for silver in the industry.
Silver jewelers are expected to “weather the storm” this year much better than their counterparts with other precious metals due to the increased availability and popularity of silver jewelry online.
Metals Focus, an independent consultancy specializing in precious metals, predicts an annual decline in global silver jewelry production by only 7%, while for gold – a decline of 25%.
This is confirmed by US statistics, where imports of silver jewelry in dollar terms improved from -65% YoY in April to -41% in May, while imports of gold jewelry fell 91% in April and barely recovered to – 81% in May.
Michael Barlerin, head of the Silver Institute’s Global Jewelry Demand Promotion, spoke about a consumer sentiment survey in June that asked respondents to estimate pent-up demand in the wake of the COVID 19 pandemic.
“The results were very positive: 64% of those surveyed said they were planning to buy deferred gifts, and more than 50% of them assured that they would prefer silver jewelry,” Barlerin said.
Global primary silver production (mining) is expected to continue to decline, reaching approximately 778 Moz (-7%) by the end of 2020, given that most of the leading mining enterprises have already resumed operations after being shut down due to COVID-19. …
In the second half of 2020, the inflow of investments in silver is likely to continue, experts say Silver Institute…
This is primarily due to its status as a safe haven asset, exceptionally low interest rates and unprecedented liquidity injections by central banks, and a widespread belief among investors that silver is undervalued relative to gold.
Gold Miner Bulletin