Silver Price Forecast & Prediction: 2021 and Beyond
At first glance, almost nothing is happening on the silver market lately. The metal remains in the shadow of its older peer - gold - and does not show the most remarkable dynamics. Yet now it is worth paying attention to it, experts say, because a gradual recovery of the world economy will fuel demand for metals, especially for industrial ones. Silver is a precious metal that is actively used in industry.
Today we will provide an insight into silver price predictions for 2025, will have a look at the technical picture, and will learn about some important factors that influence the quote.
Demand for Silver
Silver is historically considered a precious metal, though, about 50% of global demand is for industrial needs (gold has less than 10%), 25% is for jewelry and silverware, and only 20% is for investment demand. Silver, unlike gold, has not long been used in the gold reserves of the world's central banks. That limits its value in the eyes of investors, and the main driver of demand for it lies in industrial applications.
If you look at the structure of industrial demand for silver at the end of the 20th century, you see that the biggest consumer of silver was photography enthusiasts. It was the era of Kodak and photography printing - at that time, 26% of all silver in the world was used in photography. But with the decline of the era, the consumption of the metal dropped almost tenfold - now photography accounts for no more than 3% of the total demand.
After two years of growth, global silver demand fell 10% to 896.1 million ounces in 2020 as a result of strong investment demand failing to offset losses in jewelry and silverware demand.
After falling just below record levels in 2019, industrial production fell 5% last year to a five-year low of 486.8 million ounces. Unsurprisingly, this was overwhelmingly due to the impact of the COVID-19 pandemic on economic activity and, in turn, on many end-users of silver.
This year, investment in the physical precious metal (silver investment coins and bars) should reach a six-year high of 257 million ounces.
However, base metal quotations will suffer in case the global economy slows down after the pandemic. It, in turn, may force investors to refrain from buying the gray metal.
The demand outlook is quite encouraging: globally, it will reach an eight-year high in 2021 (1.025 billion ounces), thereby offsetting the losses incurred last year. That will result from a major increase in industrial demand as well as investment in physical precious metal, jewelry, and silverware.
Industrial demand should reach a 4-year high of 510 million ounces in 2021, up 9% from 2020. Interest from the electrical and electronics industries will account for most of the increase. 5G technology will become more prevalent in consumer electronics, leading to a 7% increase in silver demand in that industry, up to 300 million ounces from 2020.
In the second half of 2020, the photovoltaic module industry began to recover. Global silver demand from this industry is projected to reach 105 million ounces in 2021, offsetting last year's decline. Silver usage will decline, but the industry will still be at the forefront of demand as more countries install photovoltaic modules. Demand for gray metal from the auto industry should rise sharply in 2021, to just over 60 million ounces, thanks to the increased production of electric cars.
Global demand from the jewelry industry is expected to rise to 174 million ounces but remain below pre-pandemic levels. That is largely due to a small increase in India, where demand suffered from high and volatile rupee silver prices. A similar situation will be seen in the silverware segment, which is also affected to a greater extent by India. Cumulative tableware production should rise in double-digit percentages to 45 million ounces, while the global total will lag well behind 2019 levels due to problems in India.
On the supply side, things are also rather ambiguous. In most cases, silver is mined as a co-metal in the production of gold. Therefore, its production is primarily a function of global gold production: the more gold is produced in the world, the more silver is produced.
Because gold and silver have different sources of demand, there is a significant divergence in the behavior of the price of silver and gold. It turns out that the higher the investment demand for gold, the greater the investment in its production and the higher its actual production and, consequently, the production of silver.
At the same time, if this growth of production is not supported by the growth of demand from industrial consumers, it leads to an imbalance in the market and a fall in the price of silver. Therefore, the so-called "gold to the silver ratio", which is often used to support the thesis of the cheapness and necessity of buying silver due to high gold prices, has no strong fundamental basis.
Silver Price Today
The commodities sector suffered significant losses last week, with rising prices for commodities (that are important to China) raising concerns about the recovery in the country with the highest consumption. Also of greater concern in the short term is the continued spread of the delta variant of the coronavirus, leading to another temporary lockdown and reduced population mobility in some of the world's major economies. This headwind, complemented by the prospect of an earlier-than-expected return to policy tightening by the U.S. Federal Reserve, helped put upward pressure on the dollar, which ultimately reduced risk appetite in the markets.
Consequently, investors increased demand for safe-haven assets because of the spread of the delta strain of the coronavirus. We are talking primarily about Asia and the United States. In numerical terms, the figures are not the most frightening, but the fact of virus activation with multiple countermeasures upset and scares bidders.
If China and Japan talk about a likely return of social restrictions as part of the fight against the virus, gold could become even more attractive as a safe-haven asset.
Silver was up nearly 3% last week, again on a very dynamic Monday. Physical demand for silver remains limited, with the global industry unable to ramp up production due to both foggy demand and supply disruptions in materials and semiconductors. As per forecasts, the new week for silver will be in the $23.50-24.00 range.
The outlook for the silver price in 2021 remains exceptionally positive, with the average annual price expected to rise 46% to a seven-year high of $30/oz.
Given the smaller size of the silver market and the increased price volatility it can cause, analysts expect silver to comfortably outperform gold this year.
This year, silver is projected to rise 33% and average an annual price of $27.30. Perhaps it could peak at $32. Philip Newman, managing director of Metals Focus, said strong industrial and jewelry demand would underpin the market, but investment demand will be a major determinant of prices.
Trading silver is interesting. First, you have to learn how to tolerate deep stops and corrections. It is the norm for this instrument to take down the risk control and then go back 2-3% intraday. Hence, this instrument is not the best choice for beginning traders, who decided to practice on the commodities market. It is much better to start with gold or oil.
An established sideways direction allows the use of indicators such as RSI and countertrend trading on the Price Channel. On the 15-minute chart, the lack of liquidity in this instrument will be noticeable. However, it is already possible to work on an hour chart. As mentioned above, the stops should be set very wide in order not to fall into the so-called "saw" when the change in the deposit from stop orders exceeds the change in the directional trades.
Silver trading takes place in completely different markets. Besides delivery futures, there are also settlement futures, forex currency quotes, and derivatives - options.
Silver Price Predictions for 2021 by Experts
The resurgence in gray metal prices began in 2019 and has continued over the past year. The average annual rate of silver rose from $16.19 per ounce in 2019 to $20.52 in 2020, an increase of 27% (based on London Bullion Market Participants Association quotes). The gray metal has improved amid the pandemic as most countries have adopted loose monetary policies. It helped reduce real interest rates, which increased the popularity of protective assets, so investors were very eager to buy silver and other precious metals.
At the beginning of 2021, there was optimism in the silver market. Rising demand for it from individual social media investors drove the rate to an 8-year high of $31.1 an ounce, and the gold-silver ratio fell to 62, a 7-year low.
Some experts believe that in 2021, gray metal quotes should rise even higher, with the annual average rising 46% to a 7-year high of $30. The silver market is relatively small, so the volatility there is quite strong, which means that the gray metal will be able to overtake the yellow "brother" by the growth rate of quotations this year.
At the same time, WalletInvestor offers a humbler vision of the future price of gold. Experts believe that by the end of 2021, the maximum price will reach $24.14.
However, according to the head of the research group Next Generation Julius Baer Carsten Menke, the demand for silver from investors looking for safe-haven assets, most likely, will not increase in the short term. As per the expert, the silver market continues range trading, which suggests that investors in protective assets are not concerned about the rapid spread of the "Delta" variant.
Silver Technical Analysis
In general, the precious metals sector showed growth last week. This happened against the background of the fall, which occurred in the middle of the week in the stock markets, and rumors about the probable increase of Fed's rate due to growth of inflation in the USA. Investors rushed into "protective" assets, nevertheless silver showed negative dynamics.
However, the gradual growth of the world economy after the pandemic sets a long-term positive trend in industrial metals. The long-term trend for the growth of silver quotes persists. Investment demand for silver is being replaced by jewelry and industrial demand. Growth in the global ESG agenda is creating additional demand for silver involved in the production of both solar panels and electric cars.
Undoubtedly, silver has potentially very good prospects for a rapid upward movement. Zero interest rates, continuing QE, rising inflation, and negative real government bond yields make for an all-time high marathon. The only question is timing, but we won't have long to wait. Indeed, the spring is tight.
Silver, as a less liquid asset compared to gold (and more volatile), has the potential to show a more amplitude movement. Consequently, it brings the possibility to earn more from long positions.
In terms of technical analysis, an upward triangle has been forming on the higher time frames for almost a year, after the rapid growth earlier. The local lows are higher than the previous ones, which is also in favor of the buyers. As a rule of thumb, such chart patterns are exiting upwards, by the amplitude of the triangle and the size of the previous rising wave. The trigger for the momentum will be fixation above $28-30, but we think that buying is possible now, as a confirmation of the divergence on the daily chart and a break-out of the local maximum of $25.55, the targets are outlined in the chart below:
Silver Prices Forecast 2022
Considering all the above mentioned, we can say that the silver market is likely to remain balanced over the next few years unless significant new points of demand growth emerge.
These potential points include the development of 5G networks, smart grid management systems, and electric cars that use more silver than classic cars with internal combustion engines.
However, even these trends are unlikely to fundamentally change the demand for silver, and it will remain at around 1 billion ounces a year, or about $28 billion. That is a very narrow market if you compare it to gold or the same copper ($250 billion and $160 billion, respectively).
Therefore, the silver market has historically been relatively illiquid and quite easily manipulated, when one large financial player (or many small ones) can significantly raise the price of the metal with quite small investments. Historically this has ended in a price collapse, and we would not expect the price of silver to rise significantly above $28-33 per ounce in the medium term, and a long-term price of $20 per ounce is acceptable to most market participants.
As for the authoritative WalletInvestor, the average price of silver in 2022 is $27.89, while the maximum is $28.29.
Silver Prices Forecast 2023
Silver on the global metals market does not have the investment qualities of gold, but it is considered a good indicator of investor sentiment, as it is used in industrial production.
The fundamental outlook suggests that investors can expect a rally in silver closer to the end of this year.
First of all, the long-term price is supported by a strong excess of demand overproduction - the available sources of silver continue to decrease, the cost of production is growing, and producers have to use stocks. And this is even though the investment component in the demand for the metal will rise.
Estimates suggest that the next 3-5 years will allow industrial demand for silver to add another 40% even if the recessionary mood in Europe and China persists.
So silver mining companies have the potential to make good profits over the long term, especially if they invest wisely in their operations.
If we refer to some concrete figures, analysts at WalletInvestor suggest that by 2023 the average price of silver will be $31, with the minimum and maximum of $28.43 and $32.46 correspondingly.
Long Term Silver Price Prediction 2025-2030
Because of the rush in demand, analysts do not undertake to provide any silver price predictions for 2025. However, from a fundamental point of view, silver looks like a very promising investment, experts say. A high share of industrial consumption of silver means its price is sensitive to the world macroeconomic situation. This metal should prove itself well in the recovery of the world economy after the coronavirus.
Still, WalletInvestor experts (as always) have some ideas about silver price predictions for 2025. They think that the maximum price can be up to $41.19 and the minimum is $36.82.
Moreover, there is even a forecast for 2026! Where the average price is $42.7 and the maximum is $ 44.66.
How Has the Price of Gold Changed Over Time?
In November 1919, one ounce of silver cost $1.13. From then until mid-1932 the value of this precious metal gradually declined until it reached $0.28 per ounce. Such a dramatic decline was due to the overall sad picture of the U.S. stock market, caused by the Great Depression. But it wasn't a coincidence. Silver is a fundamental asset and a metal used in industry. Its price is mainly influenced by industry use and demand. Its role as money is of secondary importance.
The economic depression and deflation have led to significant declines in the prices of many goods and services, including raw materials. Ironically, commodities survived their own "deflation" during the wild '20s. It was the only decade before the stock market crash of October 1929. The Great Depression only accelerated the decline in the value of silver.
The demand for silver first took off in 1942. At the height of World War II, the metal and its derivatives were vital to the production of radio stations and Enigma encryption machines. It was then that demand greatly exceeded supply, and this trend continues to this day.
It is reasonable to consider the dynamics of silver price growth since 1970. It was from this period that the price range and a complete list of factors influencing it were formed.
The first price explosion occurred in 1980, which caused the following reasons. First, American oil magnates of the Hunt brothers bought up 30% of the silver reserves in the world (they bought the largest silver deposits in Mexico). Secondly, the fourth scientific and technological revolution was beginning and the number of printed circuit boards for computers and communications increased by several orders of magnitude. The price increase was 700%, and this far exceeds the profits that can be obtained even at the risk of trading CFDs.
If you look at the silver charts, you get the impression that the metal is in a very long-term bullish trend. Its price has been rising for decades and the 90-day trend seems to have formed good support. The price's initial rise began between 1940 and 1980. Since 1980, the silver market has seen extreme volatility, but the uptrend is less and less visible.
The extreme volatility of the price of silver makes it difficult to invest in this precious metal over the long term. Therefore, investors should look for profitable entry points, rather than hoping for time. For example, if you bought silver in 1980 at $36, you would have had to wait 31 years for low prices for this precious metal. It wouldn't be until 2011 that you could make some money on it.
If you had kept silver all that time and sold it for $48, you would have earned 33%. It turns out that the annual return on silver is at 1% - that doesn't even cover the annual increase in inflation. That was the good news.
The bad news is that we haven't accounted for inflation over the years. Buying silver at $36 at the peak in 1980, and selling it at $48 in 2011, we have a loss of 53%. So, one ounce of silver would have to be worth $125 now to match the $36 price in 1980.
It is worth remembering that the historical record price of silver is now $49.45 per ounce, which was reached in January 1980. Since then, it has never been possible to break that mark. Therefore, it is safe to say that the real value of silver is now only 1/5 of the price we saw in January 1980. Simply put: a $1 invested in silver in January 1980 is now $0.20. Therefore, only a rise in silver to $125 per ounce will be able to equal 1980 high.
The second price hike occurred at the turn of 2010-2011 and was associated with a serious financial crisis, as well as the mortgage crisis in the United States.
The price reached the $48.60 per ounce mark in 2011. The fundamentals of the market were seriously undermined and only silver became a safe-haven asset that brought in substantial annual income.
After reaching this historic high, there was a collapse of its value by 70%. The low was $11.77 in March 2020. Then there was a recovery and a rise to nearly $30 in August 2020. Silver is currently trading at $24.09.
Factors That May Affect the Silver Price
As we have mentioned, the dynamics of silver are a clear indicator of investor sentiment. This metal belongs to the group of industrial metals, so the dynamics of such parameters as silver rate depends on the development of industry, production, and economy.
The rate of gold for a long time remains practically unchanged. Silver appreciates and depreciates much faster. First of all, it is connected with big amounts of mining this precious metal, but not only. Unlike gold, which as a rule does not lose in value, it can often become very cheap, but also its price can rise significantly.
To better get the idea of where the price is going, let us have a look at the factors affecting the rate:
Precious metals such as gold, silver, and platinum can be used to mitigate the effects of inflation, deflation, or currency devaluation on a country's economy. Usually, when a country's economy suffers from any of these problems, proceeds from bonds, stocks, and real estate are used as a hedge against financial stress. However, if all this fails to adequately compensate for risk and inflation, the demand for gold and silver and other alternative investments increases. However, after a period of financial stress, gold and silver prices may fall again as traditional investments become more attractive.
Gold and silver can be short sold in either physical or futures markets, and negative delta positions can be taken in many other derivatives. Short selling is an abuse of buying stocks without first finding a source to borrow the stock. Many believe this often leads to artificial suppression of the market.
Short selling is done by speculators who have no plans or ability to deliver their wares but intend to close their position before their contracts expire. According to many, the centers of unscrupulous short selling are around the London Bullion Markets Association, the U.S. Federal Reserve, and banks such as JP Morgan Chase and HSBC. For years, observers of the gold and silver markets have noted that gold and silver prices are artificially falling at the start of New York trading.
In recent years, the practice of recycling has become so common that this industry alone has become a multi-billion-dollar industry. Services that offer people cash in exchange for their old, broken, or mismatched jewelry are becoming increasingly popular, both offline and online.
Silver recycling affects global silver prices, and the impact is felt more in places where the practice is more common. However, this is partly because many "buyers" of used metal take advantage of their customers by paying a fraction of what the silver is worth.
Historically, oil has shown a strong correlation to silver in terms of price. Since the 1960s, silver, and oil prices have correlated with a coefficient of 0.7.
Some have argued that the strong correlation is because silver mining is energy-intensive, and therefore, as oil prices fall, silver prices will also rise or fall. Nevertheless, this argument downplayed many other essential factors.
What Is the Future of Silver? Is Silver a Good Investment?
So, what is the advantage of using silver as an investment?
The main advantage of this metal is its ever-increasing influence on the economic component on a global scale.
It is due to its active use in the industry. The electronics, health care, medicine, the military-industrial complex, and other industries could not develop without this metal.
Silver is also actively used in the jewelry industry, but it is only a small portion, about twenty percent, of its total use.
Silver reserves are gradually depleting, while demand for it is constantly growing, which is why investors underestimate the growth of their value.
It is recommended that every trader invests in silver given its potential.
At least a small part of an investment portfolio should be allocated for this kind of investment. It will help diversify it and have an additional reliable asset in the portfolio.
You should invest in silver when the market is quiet and not when the price of silver goes up.
Summing up the possible prospects of silver price rates, we can say that almost all the experts` estimates are pretty optimistic, especially taking into account the increasing popularity of green energy and electric vehicles. Indeed, the green transformation could be a powerful support for silver demand in the industry. Silver is needed for solar panels, and many countries are starting large-scale renewable energy projects.
In addition to solar power, silver is also actively used in the production of electric cars. High electrical conductivity and corrosion resistance make the use of this metal in electronics essential. According to forecasts, by 2040. 49% of all silver produced in the world will be used in the production of electric cars. Therefore, the development of a green economy in the world could lead to shortages of this metal and an increase in its price in the long term.
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