It’s as certain as the changing of the seasons that in tumultuous times, investors turn to safe harbors. So it is that the surging price of gold comes as no surprise to anyone in the wake of the unfolding events in Ukraine. However, the fact that silver also rose by eight percent to a five-month high went practically unnoticed. Edmund Moy is a senior retirement strategist at the US Money Reserve who specializes in precious metals. The former director of the US Mint predicts that 2022 could see the price of silver rise to record levels.
The not so poor relation
Silver is sometimes perceived as the poor relation where precious metals are concerned. Its value has traditionally tracked with that of gold, albeit at a lower level. However, when we look at the current price of silver, there are additional factors in play.
To understand these, we must first adjust our perception of what silver is. Yes, from an investments perspective, it is categorized as a precious metal alongside gold, platinum and palladium. However, when we look at the uses and the drivers for demand, we could as easily class it as an industrial resource.
Industrial demand could hit new heights
Over the past two years, there has been a slump in industrial demand for silver due to the disruptions wrought on supply chains by the global crisis. All that is set to change, however, as industries get back up to full speed and output. Silver is used in electronics, and specifically in green technology such as solar panels and EV components. It also plays a vital part in the 5G rollout.
The Silver Institute predicts a five percent increase in industrial demand this year to a record high of 552 million ounces. That represents around 50 percent of total demand, which is predicted to hit a record 1.112 billion ounces, an increase of eight percent over 2021.
These two figures are significant. Robert Minter, an investment strategist at Aberdeen Asset Management, says silver can be thought of as “half copper and half gold” with prices influenced by industrial needs and the traditional hedging demands associated with precious metals in general. The combination of these two factors is what makes silver such a tantalizing investment prospect as we look ahead into 2022.
Michael DiRienzo is Executive Director at the Silver Institute. He expects to see a 10 percent increase in investor demand for physical silver over the rest of this year, and describes mining stocks and silver ETFs as a part of any “savvy investor’s toolbox.” Each choice has its pros and cons – the former is better protected from outside economic factors in these uncertain times, but storage and portability can present difficulties. Stocks and ETFs are convenient but carry a little more risk.
Ultimately, there is no right or wrong answer, and it comes down to balancing your portfolio in accordance with your long term investment aims and your risk appetite.