Silver is primed for a big breakout.
January saw the price of silver swing wildly, but despite that, demand for the metal is up, with January seeing the U.S. mint 5 million ounces of silver in January, the best start to a year since 2017. Silver coin sales are up 4.6%.
“Overall, we continue to see strong demand for all retail precious metal products, so long as inflation remains a concern, and as we move closer to a contentious U.S. midterm election,” said Nicky Shiels, precious metals strategist at MKS PAMP.
Both gold and silver stand to benefit from ongoing volatility in the markets, inflation, and geopolitical risk such as the situation in Ukraine. As safe haven assets, precious metals can be an important hedge against calamity of all types.
Ole Hansen, head of commodity strategy at Saxo Banks, notes that silver has underperformed against gold, making it an attractive option for investors looking for a breakout. “We have no idea where monetary policy is going to lead us and there is a lot of fear around the geopolitical situation with Russia,” Hansen said. “If you think things are going to get worse, then it might make sense to hold some physical assets.”
Silver’s long-term prospects are buoyed by the pivot to green energy that is necessary to reduce the impacts of climate change. Silver functions both as a precious metal and an industrial one, and it is a critical component to a number of green-friendly technologies, such as solar panels. Last year, the solar sector accounted for 11% of the industrial demand for silver, over 100 million ounces of the precious metal. Experts expect consumption to grow approximately 140 million ounces this year. The push for net zero emissions will also benefit electric vehicles, which require a greater usage of silver than their counterparts.
Investors interested in silver can get exposure to the physical metal through the Sprott Physical Silver Trust (PSLV).
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