The price of silver has risen more than 70% over the past year. Commodity analysts believe that the silver price rally will continue as the global economy reopens.
Demand for silver has risen sharply in the past 12 months. Silver prices were around $27 an ounce on Wednesday, up 74 percent from $15.50 an ounce a year ago. By comparison, the price of gold has risen 6.4 percent in a year.
Silver is an integral part of many everyday products, from electronics to photography, jewelry and coins. The Silver Institute says silver’s high electrical conductivity and durability have led to its widespread use in industry and technology. Nearly every computer, cell phone, car and appliance contains silver. So far in 2021, demand for the precious metal is outstripping supply, according to the institute.
Ole Hanson, head of commodity strategy at Saxo Bank, said half of the demand for silver comes from industrial demand and half from investment demand. Silver’s use in industry has been the main driver of bitcoin’s recent appreciation, he said.
“Industrial demand is probably the main reason why we’re seeing silver outperforming gold. The price of the industrial metal has been rising. Copper prices have also more than doubled since hitting a low last year.”
Hanson said other factors such as green technology developments have spurred demand for industrial metals, such as silver for solar panel production, which has been in hot demand recently, driving up the price of silver.
Last year, the Federal Reserve and the government’s massive economic stimulus package fueled inflation concerns. Precious metals such as gold are seen as an important hedge against the risks of rising prices and a weakening dollar. On Wednesday, the official U.S. consumer price index (CPI) for April rose 4.2% from a year earlier, exceeding market expectations.
Hanson noted that if gold prices rise, silver prices will also rise, even more strongly. As a result, most silver investors are closely watching gold prices, the dollar exchange rate and interest rate levels.
While inflation may be favorable for the precious metal, market watchers will also be keeping a close eye on any tightening monetary policy aimed at controlling price increases.
Hanson said the record high of silver prices in 2011 almost reached $50 per ounce. While silver prices are still below that point, demand for silver shows no signs of weakening in the longer term. He noted.
“If we get serious about the green transition, demand for silver will continue to increase. But at the same time, the supply of silver, which is typically extracted in the process of mining other metals, may or will be limited. If it can seize some of the right opportunities, it on may run higher and faster than other metals.”
For now, an extremely optimistic outlook is unlikely.
Silver will also benefit from the reopening of the global economy in the post-epidemic era, given increased industrial production and sustained investment demand, said Max Layton, managing director of commodities research at Citi global Markets.
Silver benefited from investment demand during the New Crown epidemic and is likely to continue to do so, he said Tuesday.
“The New Crown epidemic has led to a significant decline in U.S. real interest rates and a shift in the allocation of wealth and household savings to gold and silver. This will continue to offset the weakness in industrial consumption.”
However, he notes that a third wave of the New Crown epidemic may continue to dampen industrial demand for silver and temporarily remove the extremely optimistic expectations for silver. Overall, however, Layton said there is still room for silver prices to continue to rise. He observes.
“The cessation of de-stocking in China and India will allow the silver market to really pick up. The silver rally will continue as long as the world remains concerned about the mutation of the new coronavirus and worries about the impact of the outbreak on the service sector. Both concerns are likely to cause policy makers to keep real interest rates low and keep investment demand high.”