Silver Will "Comfortably Outperform" Gold
The world's demand for silver will climb to an eight-year high in 2021, according to the Silver Institute, creating conditions for silver to "comfortably outperform" gold this year.
"The outlook for silver demand is bright, with the global total forecast to achieve an eight-year high in 2021 of 1.025 billion ounces, thereby recovering all losses sustained in 2020," the Silver Institute said in a report last week. "This reflects expected gains in the critical segments of industrial demand, physical investment, jewelry, and silverware fabrication."
Industrial demand for silver is forecast to rise 9% over last year to a four-year high in 2021. Demand from the electrical and electronics sector is expected to account for most of this increase.
Meanwhile, investment demand for silver is still smashing records.
Global holdings in silver ETFs ballooned in 2020, ending the year with 1.04 billion ounces in storage.
The report continues, "Since then, global ETP holdings have continued to escalate. Through February 3, ETP holdings rose 137.6 million ounces to a new record level of 1.18 billion ounces."
The Silver Institute makes no forecasts on silver ETF demand for 2021. However, it does estimate physical silver bullion coin and bar purchases will rise to a six-year high in 2021 to 257 million ounces.
On the supply side, mine production is expected to recover from last year's COVID-affected levels, driven by higher output and new mine projects in Mexico and Australia. The Institute says it expects the world's silver mines to produce 866 million ounces of the white metal this year, which would be the highest level since 2016.
"Although the silver market is projected to achieve a physical surplus in 2021," it reports, "it should be the lowest since 2015's deficit."
Concerning prices, the Silver Institute is quite bullish. It reports:
Going forward, the outlook for the silver price in 2021 remains exceptionally encouraging, with the annual average price projected to rise by 46% to a seven-year high of $30.00. Given silver's smaller market and the increased price volatility this can generate, we expect silver to comfortably outperform gold this year.
The average annual price for gold last year was about $1,770 an ounce. So if silver does average $30 per ounce this year and gold's average annual price stays under about $2,580 an ounce, silver will end up outperforming gold in 2021.
But that's if gold's average annual price stays under about $2,580 an ounce. I'm not so sure it will.
Gold and silver demand has been rising among retail investors. Demand for physical precious metal bullion soared on the short squeeze news two weeks ago that major bullion dealers ran out of inventory - and that was the second time that happened within the past 12 months.
Meanwhile, mine production for both silver and gold still faces threats of fresh shutdowns as new coronavirus variants and restrictions spread across the globe.
Either way, precious metal investors look set to be big winners this year.
Until next time, As an editor at Energy and Capital, Luke's analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing's Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor's page.
Luke Burgess