Silver has seen a surprise rise in its estimation among investors. Being a versatile metal- it has myriad uses in industry, jewellery as well as its economic value as a metal has boosted its profile during recent economically uncertain times.
However the metal has also seen sharp rises and troughs due to its volatile nature and its direct link to industrial performance. The recent dips in Chinese manufacturing data and a slowdown in European industrial growth have battered silver prices as the metal is widely used in these sectors.
The cost associated with silver is another point of concern. Unlike cost, the costs associated with transportation, insurance and storage are higher since the metal is used and traded in much higher quantities.
Possible Bright Future?
There could be some light at the end of the momentarily dark tunnel for silver, as the metal’s stock is predicted to rise given a few factors.
Photovoltaic Demand Slated to Rise:
The demand from the renewable energy sector, in particular, photovoltaic cells will continue to boost silver demand. With governments and industrial sectors pushing for cleaner fuel, incentives to increase solar power production are on the rise and will prop up demand for the industrial metal.
Physical Investment Increase:
An increase in the market for silver coins is projected to continue well into 2019, backing a trend that began in late 2018 when global uncertainty and increased liquidity resulted in a rise in silver coin demand.
The greatest rise came from the U.S. in the previous year, though rising demand from India and Europe could also boost the metal’s demand and worth.
One of the biggest drawbacks associated with silver is its relative scarcity, with declining deposits keeping the amount of silver in the market quite static. A drop in mining and an increase in offtake by industries has helped maintain the overall silver market balance, resulting in all produced silver being utilised by various sectors for different purposes.
The rise in demand by the jewellery sector due to an increase in interest from markets such as India is serving to drive up prices. However constant fluctuations in offtake due to dollar volatility continue to hamper the supply-demand ratio when it comes to the metal.
Stagnant Demand Trends:
While there has been a gradual increase in demand for the industrial metal, uncertainty over the production of the metal has cast a cloud over investor interest in the metal. Market volatility has also ceased to influence investors to increase their stakes in silver as they have switched to other financial instruments such as equities and silver ETFs (Exchange Traded Funds).
As highlighted earlier, the drop in silver production will drive up the cost of the metal, making it unattractive to investors looking for short-term gains. Despite the rise in interest from the renewables sector, stagnant growth among investors due to the increased cost would severely dampen the metal’s prospects.
The recent market volatility over the Sino-U.S. trade crisis momentarily boosted bullion demand but gold saw a higher percentage of trade and sales. The yellow metal’s ease of use and higher liquidity possibilities make it more attractive to investors in general. If the current pace of silver offtake is an indication, there could be trouble for the metal despite the positive trends outlined, since the key driving force would be missing-namely, demand.