After several years of gradual decline, are silver prices due a rebound? One headwind remains: silver, like gold, is a monetary metal held as a hedge against inflation and turbulence. The likelihood of higher American interest rates makes precious metals, which pay no interest, less appealing.
On the other hand, says Capital Economics, "oversupply in the silver market has been one of the key factors depressing prices in recent years" and on this front, the picture is becoming more bullish. Mined supply is set to decline by 4% this year after 12 years of increases.
Meanwhile, around half of the demand for silver stems from industry, with America, Europe and China accounting for around two-thirds of this. Industrial production in these economies should muster enough momentum to ensure a 3% increase in overall industrial demand, nibbling away at stockpiles. And India and China should continue to drive jewellery demand.
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The upshot of all this, reckons Capital Economics, is that there is scope for a recovery in silver prices to more than $20 an ounce by the end of the year, up from around $16 today. Investors brave enough to take a punt on this extremely volatile metal can do so with the ETFS Physical Silver ETF (LSE: PHAG).
Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.
After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.
His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.
Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.
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