Silver Price Expected To Increase 33% in 2021: Report

Considerable growth in silver investment was the chief driver of the metal’s 27% average price gain in 2020, according to the World Silver Survey 2021, released by the Silver Institute. Leading the way was substantial demand for silver-backed exchange-traded products (ETPs), which took global holdings above 1 billion ounces for the first time since their introduction in 2006. Strong demand for silver bars and coins pushed physical investment demand up 8% to a four-year high.

In a challenging year for many markets due to the global pandemic, other components of silver demand had weaker results. Against this backdrop, overall silver supply was lower, the result of a 6% contraction in mine production, which offset a 7% increase in silver scrap supply. The market ended the year with a surplus of 80.1 million ounces (Moz).

Strong institutional and retail investor demand, fueled initially by the onset of the pandemic, combined with intermittently lower silver prices, as well as an unprecedented wave of quantitative easing and fiscal stimulus across all major economies, led to the sizeable silver investment recorded last year.

Silver-backed ETPs grew last year by a remarkable 331 Moz, an increase of 298%, to end 2020 at 1.067 billion ounces. Physical silver investment jumped 8% to 200.5 Moz, led by the US, which was up 69%, and Europe, at plus 23%.

Strong investor interest was also evident in commodity exchanges last year. Several exchanges achieved record trading volumes, including the Shanghai Futures Exchange, which overtook COMEX to become the largest exchange for silver futures trading in 2020.

The 2020 annual average silver price was $20.55, up 27% from 2019, the highest average silver price since 2013.

Global silver demand declined 10% in 2020 to 896.1 Moz, due overwhelmingly to the pandemic and its direct impact on economic activity and, in turn, many silver end-uses.

Jewelry and silverware demand dropped 26% and 48%, respectively, primarily due to significant losses in India and pandemic related shutdowns of retail stores and factories, the report noted.

In 2020, global mine production registered its fourth consecutive annual decline, its most significant drop of the last decade, falling by 5.9% to 784.4 Moz. Output from primary silver mines fell by 11.9% to 209.4 Moz, caused by temporary mine closures in several major silver producing countries in the first half of 2020 due to the pandemic.

With re-openings of economies and vaccinations accelerating in many countries, economic growth in 2021 is expected to strengthen. For the silver market, jewellery and silverware demand should enjoy double-digit increases in 2021, the report stated.

Silver investment is projected to have another strong year in 2021. Demand for silver bars and coins is expected to post its highest annual figure since 2015. ETP inflows are unlikely to match last year’s levels but should remain historically high.

Metals Focus expects that the silver price will rise to a peak of $32 later this year and that it will average $27.30 overall in 2021, which would be a 33% increase over the 2020 average price.

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