Will the Race for Silver Continue in 2022?

When it comes to silver demand, 2021 was the best year since 2015, with silver demand up across all major sectors, according to the Silver Institute.

Overall, total demand amounted to 1.029 billion ounces. In addition, the deficit in the silver market this year is expected to be around 7 million ounces. Industrial demand is expected to grow at double-digit rates in each major area. But investment in physical silver is also expected to rise to a new six-year high of 263 million ounces.1

Silver has also made headlines this year due to the “silver squeeze” triggered by social media, in which small investors have tried to counteract the massive short positions of the major banks by buying.

Even though the silver market seemed to be somewhat large for this project, a community has formed to use physical silver to hedge against massive money printing and the resulting devaluation of fiat currencies.

Veterans in the silver market, like to see that young investors are interested in the silver market. This has the potential to further increase demand in the silver market in the long term, especially through physical investments.

Patience is the Key to Success

New investors in the field who were counting on quick profits from a rapid price increase seem to be frustrated in the meantime, as these failed to happen. But as in all markets, these are not designed to calm the nerves of investors. For investors who are convinced that we are in a bull market for precious metals, this is not uncommon in view of previous bull markets. Bull markets in precious metals can go on for decades with consolidation phases that can last more than a year. Patience is therefore required, not least because the financial institutions are working against a price increase.

But this will change at some point in the future, as in previous cycles.

Silver Bull Market Duration

Source: silverprice.org

Especially the big financial houses are known to intervene in the precious metal prices and regularly accept penalties for it. The paper to physical silver ratio is estimated at 250:1 which gives a large room for price adjustments.

But what especially new investors in the field should consider is the fact that macro factors are working for the silver price. First of all, demand in the industrial sector is expected to continue to increase with the pressure on clean energy production, electronics, and electric vehicles. Secondly, real negative interest rates, huge deficit spending are the main factors for silver prices as well as the steady devaluation of fiat currencies is good for commodity investors in terms of commodity price increases. It is less good for ordinary people as they will be able to buy fewer goods with the same amount of currency due to the depreciation of their currency.

From an Investor’s Perspective

Should investors be happy about rising prices or cheap prices? Investors who are convinced that the price of silver will rise significantly in the future should be happy about the current price because it allows investors to buy more silver at a reasonable price. Moreover, experts in the silver market agree that silver is one of the biggest asymmetric plays, that is, it has the potential of a substantial increase in value.

So Will the Silver Race Continue?

Macro factors such as real negative interest rates and massive deficit spending will remain with us for an uncertain period.

From an industrial perspective, demand remains and will continue to increase in the coming years. As already mentioned above, immense sums of money are available from governments and investors to drive the green movement forward.

Silver veterans will continue to invest in physical silver or silver stocks because they see the macro factors.

So that leaves only the retail investor who is new to the market and should continue to be patient. Further price declines can be used to further expand positions. Again, the key to success will be patience.

Article Sources:

  1. https://www.silverinstitute.org/wp-content/uploads/2021/11/SI2019InterimMktPRNov19_III.pdf

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