Silver prices have been disappointing precious metal bulls for years, but that hasn’t stopped them from increasing their positions. Successful silver investors tend to be a patient bunch, buying at bargains and waiting for the tides to turn before selling. Before you buy silver, it helps to have some context to silver prices and learn why waiting to sell silver may be a winning strategy.
What’s Stifling Silver Prices?
In just two years, the world went from an impending silver supply deficit, with demand outpacing supply, to a generous silver surplus, growing from 2.4 million ounces in 2017 to 35 million ounces in 2018. What’s behind the surplus? A slowing economy has put a damper on industrial uses for silver in the short-term – but the long game has a lot of potential for those who can wait, thanks to the way silver is used.
Technology & Medicine Eating Up Silver Supplies
Jewellery remains one of the biggest uses of silver. Silver jewellery is easily recycled and recoverable, but other industrial uses often permanently remove silver from global reserves, including technology and medicine.
Another major use for silver is in technology and electronics. Silver is a highly conducive metal and it’s used in everything from solar panels to smartphones. Many of these uses render silver unrecyclable as well – or too expensive to bother. In the very long-term, finite silver supplies will dry up and disappear for good thanks to medicinal and electronics uses.
As the economy slows in both the U.S. and China, the world’s two largest economies, silver demand understandably shrinks, and that’s contributed to the low silver prices the world is currently seeing. An economic rebound will have a bigger impact on silver prices than gold.
Farmers Set to Buy Silver
No smart precious metals investor can ignore India if they want to know where gold and silver prices are headed. Silver and gold are among some of the most popular savings methods in India, especially among rural farmers who have limited access to modern banking services. The accessibility of silver, the poor man’s gold, means more money to spend among rural farmers leads to higher silver demand – and the government of India is currently in the midst of a major cash handout to the rural poor. It’s expected that many will invest these handouts in silver.
Future Silver Prices
With the world currently experiencing a silver supply surplus, investors want to know when the time for silver will come. But the most important info about investing in silver is less about supply and demand and more about investor sentiment. Industrial demand and silver production are responsible for some of the day-to-day changes in silver prices, but the biggest moves in silver prices come when investors get spooked out of the stock market and the U.S. dollar.
Silver prices in the short-term are likely to rise if the economic slowdown worsens and the U.S. dollar weakens significantly. In the long-term, dwindling silver supplies will make the element incredibly valuable. By some estimates, the world could run out of silver by the 2030s. Given how important the element has become in electronics and medicine, and how these uses leave silver unrecyclable, holding silver for the long haul will pay off.