Key Components of Silver Market Affected by Pandemic in 2020

The comments below are an edited and abridged synopsis of an article by INSTORE Staff

The Silver Institute hosted a webinar recently to discuss its annual Interim Silver Market Review, which features historical supply and demand statistics and provisional estimates for 2020.

Key Components of Silver Market Affected by Pandemic in 2020 | BullionBuzz | NicksTopSix
Portrait of a professional Goldsmith at work in her workshop creating a silver and gold ring. She is using a mouth blown blow torch to control the flame while she works on the ring. She is surrounded by the tools she uses to create her pieces of jewellery. Colour, horizontal with some copy space.

Physical investment is expected to surge by 27% in 2020, a 5-year high. The largest retail market for bars and coins, the US, will lead the way with a projected 62% gain. The second-largest market, India, has experienced a weaker second half, resulting in an estimated 20% decline for the full year.

Silver-backed exchange-traded product (ETP) demand has been strong this year. Year-to-date gains have reached 326 million ounces. Global holdings have for the first time surpassed 1 billion ounces, achieving a new high of 1.062 billion ounces. For the full year, there will be an increase of 350 million ounces on end-2019 levels.

This year, the silver price has surged thanks to Covid-19 and safe-haven demand. This goes along with an improvement in the gold:silver ratio. Having touched a record high of 127:1 in March, the ratio fell to 76 this month. In terms of the full year average, silver should rise by 27%, the highest annual average since 2013.

Silver mine production is expected to fall by 6.3% in 2020, reflecting Covid-19 lockdowns during the first half of the year. The last countrywide restrictions on mining were lifted at the end of May, and most mines have now returned to full production rates. However, there is a risk of localized outbreaks of the virus, which may affect output.

In terms of key end-use industrial segments, photovoltaic demand may fall by 11% to around 88 million ounces. Global silver jewelry and silverware demand are expected to fall by 23% and 34% respectively in 2020.

Overall, the global silver market is forecast to see another surplus in 2020 of 31.5 million ounces, the highest in three years. This compares with 26 million ounces in 2019 and represents the fifth uninterrupted annual surplus in silver. Even so, the strength of global silver investment is expected to continue, comfortably absorbing this surplus.

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