As far as precious metal commodities go, silver is distinct from gold, not only in terms of color, but also in terms of use value. While gold is treated like a vehicle used to store value, silver is demanded by industry for applications in automobile-making, solar technology, photography, and electronics. The pull of this demand keeps silver prices more volatile than its yellow cousin.
As instruments of CFD trading, the two metals share the attractive quality of guarding against inflation, so, when times of economic sluggishness are anticipated, or if they’ve already arrived, they often grow in demand and price.
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The two chief CFD vehicles used to give your funds exposure to silver are the price fluctuations of the metal itself and the price movements experienced by ETFs (Exchange-Traded Funds) that track either futures contracts, like the Invesco DB Silver Fund, or the prices of physical bullion.
In 2022, silver didn’t respond well to the environment of high interest rates, slow economic growth, and the strong US dollar, and shed 12% of its value by August. Other precious metals dealt with the conditions more successfully.
However, James Steel of HSBC Securities said he believes silver was oversold, and looking ahead offered the following: “Much of silver’s demand will be well supported and will not reflect overall industrial sluggishness”. Another factor supporting demand could be the price drops themselves, which are expected to appeal to Chinese and Indian consumers.
Join us now as we follow the silver trail into October and November, stopping over in India to check on local demand.
October
On October 3rd, gold surged the most since March due to declining bond rates and a weaken in ing dollar, but silver’s gains beat any others since February 2021. The white metal emerged 8.9% pricier, which was impressive.
Tai Wong of Heraeus Precious Metals explained that, since the UK Chancellor of the Exchequer put an end to planned tax cuts, the result had been “GBP higher, USD lower, yields lower, stocks higher and other assets like precious [metals] higher as well”.
November
Speaking about the Indian market, Chirag Sheth of Metal Focus said that “We are seeing a jump in purchases among retail customers, similar to what we saw in gold last year, because of pent-up demand”.
Particularly among rural Indians, silver is sought after and viewed as a less-expensive, more accessible version of gold because of its relative cheapness. One third of the silver India consumes goes toward jewelry, about one quarter to industry, and the rest to silverware and other uses. In November, institutions demanded considerable quantities of silver in the form of large bars.
Due to viral outbreaks, which eroded at demand and interfered with supply chains, Indians bought much less silver than normal in 2020 and 2021. In 2022, however, consumption is supposed to leap up by 80%. Silver imports between January and August totaled about 6,370 tons, contrasting with the 153.4 tons brought in during the same period a year before.
These imports mainly originate in China, Hong Kong, and the UK. One big reason for silver’s sudden popularity here, but also in Europe and the US, may be the fact that it was “relatively cheaply priced compared to gold”, according to Sawan Tanna of Perth Mint.
Producing Countries
The USA features as the ninth biggest silver producer in the world, as it churned out 1,000 metric tons in 2021, chiefly from Alaska and Nevada. Russia (number five), although double America’s size, only came out with 1,300 metric tons in the same year but is believed to hold natural deposits of as much as 45,000 metric tons.
Of all the nations on the globe, Peru’s silver deposits are probably the richest, at about 91,000 metric tons. In 2021, Peru produced 3,000 metric tons, down from the 2018 figure of 4,160 metric tons due to the pandemic. China comes in at number two, and first place goes to Mexico who unearthed 5,600 metric tons in 2021. Experts believe there’s still about three million metric tons of silver sitting in the earth’s crust.
Wrapping Up
Chirag Sheth says the period of strong silver demand could last for the three to four months following November, after which demand will subside, and 2023 will be slower than its predecessor. Then, according to Wayne Gordon of UBS Group, silver prices will track gold prices, giving those who engage in CFD trading of precious metals like silver and gold plenty to watch for.
HSBC says average silver prices for this year will be $22.25 an ounce but climb to $23.50 in 2023, and UBS Group believes early next year will see prices as low as $19 an ounce. Stay tuned to financial news, especially that focused on commodities and international policy, to gain essential data that could help you make more informed CFD trading decisions.
