Silver lining to Trumpflation

Silver has risen in price by more than 12% this year, and there should be further to go. Industrial applications make up around 55% of overall silver demand; they range from medicine (the metal has anti-bacterial properties) to solar panels. Thanks to the solar industry in particular, overall industrial demand growth expanded by 3% last year and is set for a similar expansion in 2017, reckons

Meanwhile, jewellery accounts for a fifth of demand, while the rest stems from physical silver and silver-backed exchange-traded funds. Silver is a monetary metal and a traditional store of value like gold, so it tends to benefit from the same trends as the yellow metal. One that bodes well is the return of inflation.

In the US, wage growth has already hit a post-crisis high as the labour market continues to tighten, while core inflation reached a four-year high in 2016. Oil prices are rebounding, and Donald Trump’s stimulus could give price rises an additional fillip. Some analysts are pencilling in inflation above 3% in the UK. On the other hand, if fears of protectionism gather strength, precious metals should benefit too.


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