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Silver Market Trends in 2019

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Silver faced a profusion of fundamental headwinds in 2018.

Overall, silver supply edged up approximately by 0.3% while demand contracted by 3%.

With US interest rates rising, a Chinese economy slowing, global trade war tensions mounting, and a stock bull market raging…

All of these factors contributed to a plunge in gold and silver prices...that is, up until the end of the year when the very conditions that plunged the metals triggered their sharp upward reversal.

This year, we see early evidence of this bullish emergence continuing; optimistic news for silver investors who were prudent enough to get at the discount levels that 2018 presented.

The US Mint had already sold 12% more American Eagles in January of this year as compared with the January 2018.

The sudden slowdown of the Fed’s rate hikes should continue providing tailwinds to both gold and silver.

But silver presents us with a unique advantage: its price point is much more attractive and affordable based on the current gold-to-silver ratio which is at historical highs of 82-to-1.

This ratio went as low as 30:1 in 2011; some analysts expect it to contract to its original 15:1 ratio.

Against this macroeconomic mise en scene, here’s how we see the silver market unfolding in the current year.

Silver Demand Rising

Bear in mind that 60% of silver demand comes from industrial fabrication. We expect this figure to rise across most sectors in 2019.

Silver for electrical and electronic applications and for brazing alloys and solders--this form of industrial demand is, once again, on an uptrend.

Much of this rise is attributable to increasing demands in the automotive sector, where multiple applications for hybrid and electric vehicles are dependent on silver as a critical component.

In addition to this, there is growth in silver usage across other various other sectors including LED lighting, chemical applications, water purification, electronics and screens, and textiles.

Last but not least, every silver investor should note the increase in global efforts toward energy diversification.  That is, energy production by means other than traditional fossil fuel processes.

These efforts have given rise to the demand for photovoltaic (PV) tech. PV demand continues to provide support for silver usage as governments incentivize solar power installation and usage.

In fact, global solar power capacity is forecasted to increase over 100 GW by 2022.

China’s solar power efforts may have slowed last year, but this slowdown is likely to be offset by demands from other countries, such as Australia, various countries in Europe, and especially India.

As in years past, India is expected to remain the largest global consumer of silver. Just take a look at their 2018 which was 35% higher than the previous year, topping at nearly 225 Million ounces.

We also can’t dismiss silver demand for jewelry, a demand that seems to remain relatively steady and consistent.

On the investment front, silver-backed exchange-traded funds are expected to swell by around 8 Million ounces this year. Most of these funds are generally held by retail investors rather than investors on the institutional side.

Silver bullion demand is also expected to increase this year by 5%. With bullion coin demand picking up in the US as of January, we reasonably expect demand to increase across Europe, which saw a 6% jump in 2018 (when silver demand in the US was mostly decreasing).

Looking over these factors, we believe that, collectively, they comprise adequate force in demand to support the continuing rise of silver prices as the current year unfolds.

Silver Supply Declining

Silver mine production from primary sources is down and expected to decrease further by -2% in 2019.

Although secondary production may have increased slightly, from lead/zinc and gold mining operations, a rise in primary production is nowhere to be seen on the horizon.

Despite a potential uptick in industrial scrap supply, the market balance (supply minus demand) is such that 2019 may yet be another year (following the last two) in which current silver production is absorbed by downstream sectors.

So what does this mean for silver prices?

As you can see, there are plenty of fundamental factors to support the case for silver’s rise.

Analyst forecasts range widely, from a meager 7% average to figures within the $21.50 to $26.00 range.

However far it may go, silver prices are poised for a major upswing. And it’s best to prepare for that rise by getting into position NOW.

Besides silver’s growth potential, don’t forget the one important principle that underlies this entire equation:

Silver = Sound Money.

And there is no reason not to allocate a portion of your portfolio to money that is reliably sound, inflation-resistant, growth-bound, and unlike paper money...real.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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