Rising inflation and silver deficits were not enough to send silver prices flying in 2021. Even the joining of retail investors in forums could not make silver prices rise. Thus, in the end, only a disappointing year 2021 remains on the account.
According to the U.S. Mint, demand for silver was down 6% in 2021. It sold just over 28.2 million ounces of silver, compared with over 30 million ounces in 2020. Gold demand, on the other hand, has jumped to its highest level in more than a decade. After a good start, silver demand has steadily declined.
The silver price, on the other hand, raises some questions. Probably one of the most important is why the silver price has not been able to respond to the silver deficit in the market. The Silver Institute reported a deficit of about 7 million ounces, which was the first deficit in 7 years. The answer to this will probably come down to how the price of silver works, mainly through paper silver. Banks and hedge funds are known to rule the roost here.
Will 2022 be better?
Industrial demand and currency inflation are likely to be the main drivers.
Green energy will not work without silver, so everything related to solar energy, electric vehicles, and electronics is a driver for the silver price. More than half of the demand for silver comes from industry. Here experts see a big deficit coming for the next years, the problem: There is not enough silver for everyone. Just to cover the demand for silver in the U.S. would be an enormous undertaking. David Morgan told Kitco.com, “There isn’t enough silver to put the United States housing market on solar, let alone the industrial side of the United States. In other words, all commercial activity in the United States that require electricity would require about two years’ worth of all the silver we mine on the planet. To put all the houses on silver would take about one year’s worth of silver.”
In addition, there is the loose monetary policy of the central banks. Negative real interest rates are drivers for precious metals like gold and silver. As a rule, gold will move first and silver will follow more strongly. Since the U.S. Federal Reserve announced interest rate hikes for 2022 is not expected to be sufficient to keep pace with inflation. This will mean that real interest rates will remain negative, which is bullish for gold and consequently silver.
The demand from the industry is there and will increase in the next few years. Now it also depends on the investment demand which was not particularly good in 2021. If the ice breaks here and the price breaks above $25, that would be a clear bullish signal for silver.