Huge market deficit, speculation, and investment appeal
Aggiornato
Silver is a precious metal that has long been valued for its versatility, beauty, and rarity. Its unique properties have made it an important material for both monetary and industrial uses. While silver is often overshadowed by gold in terms of investment appeal, it has its own unique investment potential that should not be overlooked. Based on the data from The Silver Institute and Metals Focus, there are several developments in this space that may make silver an attractive option for investment or speculation in the coming months.
To better understand this opportunity, it is important to be acquainted with the driving forces in the silver market. Silver is produced by mining and recycling. On the demand side, silver has a variety of uses, including in jewelry, silverware, investment, and industrial applications. In 2022, the total supply stood at 31,250 metric tonnes. Meanwhile, total demand reached 38,643 metric tonnes.
The mining activity accounted for 81.84% (25,578 metric tonnes) of the supply in 2022, with recycling contributing the remaining 18.16% (5,618 metric tonnes). Mining output dropped by approximately 1% YoY, and recycling grew by about 3% YoY.
As for the demand in 2022, industrial use accounted for 44.79% (17,309 metric tonnes), jewelry for 18.83% (7,280 metric tonnes), silverware for 5.91% (2,286 metric tonnes), photography for 2.21% (855 metric tonnes), and physical investment for 26.79% (10,356 metric tonnes); the remaining 1.47% of the demand relates to the other uses.
The investment demand for silver doubled from 4,884 metric tonnes in 2017 to 10,356 metric tonnes in 2022. Furthermore, jewelry demand fully recovered from a slump during the Covid-19 epidemic, rising from 4,680 metric tonnes in 2020 to 7,280 metric tonnes in 2022. In fact, the total demand for silver returned stronger from the 2020 disruption, resulting in the market being undersupplied by 7,393 metric tonnes in 2022.
As the World Silver Survey 2023 expects the total output to grow only by 2% in 2023, the market deficit represents an interesting dynamic that might prove to be impactful to the price of silver in the future. However, with the current weakness in the precious metals sector, we think it would be reasonable to either wait a little bit longer before entering a trade or start with very small purchases in multiple transactions (leaving more capital on the side for later). Our goal would be to get the entry closest to the $20 price tag and wait for silver to rise above $26.
Illustration 1.01
Illustration 1.01 shows the daily chart of XAGUSD. One red arrow indicates the declining price from 5th May 2023 until yesterday; the other red arrow hints at volume, which started to decline more recently. Normally, such a relationship between the price and volume suggests that selling pressure is losing steam, and reversal can be impending.
Technical analysis
Daily = Bearish
Weekly = Bearish
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
To better understand this opportunity, it is important to be acquainted with the driving forces in the silver market. Silver is produced by mining and recycling. On the demand side, silver has a variety of uses, including in jewelry, silverware, investment, and industrial applications. In 2022, the total supply stood at 31,250 metric tonnes. Meanwhile, total demand reached 38,643 metric tonnes.
The mining activity accounted for 81.84% (25,578 metric tonnes) of the supply in 2022, with recycling contributing the remaining 18.16% (5,618 metric tonnes). Mining output dropped by approximately 1% YoY, and recycling grew by about 3% YoY.
As for the demand in 2022, industrial use accounted for 44.79% (17,309 metric tonnes), jewelry for 18.83% (7,280 metric tonnes), silverware for 5.91% (2,286 metric tonnes), photography for 2.21% (855 metric tonnes), and physical investment for 26.79% (10,356 metric tonnes); the remaining 1.47% of the demand relates to the other uses.
The investment demand for silver doubled from 4,884 metric tonnes in 2017 to 10,356 metric tonnes in 2022. Furthermore, jewelry demand fully recovered from a slump during the Covid-19 epidemic, rising from 4,680 metric tonnes in 2020 to 7,280 metric tonnes in 2022. In fact, the total demand for silver returned stronger from the 2020 disruption, resulting in the market being undersupplied by 7,393 metric tonnes in 2022.
As the World Silver Survey 2023 expects the total output to grow only by 2% in 2023, the market deficit represents an interesting dynamic that might prove to be impactful to the price of silver in the future. However, with the current weakness in the precious metals sector, we think it would be reasonable to either wait a little bit longer before entering a trade or start with very small purchases in multiple transactions (leaving more capital on the side for later). Our goal would be to get the entry closest to the $20 price tag and wait for silver to rise above $26.
Illustration 1.01
Illustration 1.01 shows the daily chart of XAGUSD. One red arrow indicates the declining price from 5th May 2023 until yesterday; the other red arrow hints at volume, which started to decline more recently. Normally, such a relationship between the price and volume suggests that selling pressure is losing steam, and reversal can be impending.
Technical analysis
Daily = Bearish
Weekly = Bearish
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Nota
Silver is approaching the upper bound of the channel. If the price breaks above the upper bound, it will be bullish. Nota
As silver continues to tick higher, a trailing stop can be utilized to secure profits. The important support area spans between $24.55 and $24.63. 
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