The price of Silver is expected to hit $30 an ounce in 2023, possibly outperforming other precious metals like gold. The last time silver hit this level was in 2013. This silver headwind is as a result of a number of factors. The two major reasons are insufficient supply and inflation. Silver tends to do better than gold when the inflation is high, and there are other key drivers that drive the silver price to outpace that of gold.
Historically, silver has typically delivered 20% gains on a yearly basis when inflation is running high. Given that track record, and how cheap silver remains relative to gold, it’s no surprise that the silver price could reach the $50 point.
In 1980, the silver price reached record highs of $49.95 when the inflation rate was at a staggering rate of 13.5% between 1976 and 1980 from 5.7% to 13.5%. When inflation reached 6.5%, the price of silver soared to $24.02 per ounce. This year, the silver price is expected to reach upwards of $30. As previously mentioned, one of the chief reasons for this price change is:
There has been a notable shortage in the supply of silver in recent years. It is expected that over the next five years silver will post a net deficit of 100 million ounces or more if the current demand for this precious metal does not increase.
The biggest demand for silver comes from the industrial sector which accounts for more than 50% of the total global silver demand. This is expected to grow by more than 15% in the next coming years depending on how fast the industrial sector keeps growing. Industries that have shown a steady growth in the silver demand has been the automotive sector and electronic sectors. Silver is also being increasingly used in the green energy space, in the manufacture of solar panels. While demand grows, supply has actually been waning as far as silver mining goes.
According to The Silver Institute, the supply of this precious metal from mining operations has lowered significantly in less than 5 years. Back in 2016, silver mines were producing 900 million ounces of silver a year but that number dropped to 843.2 million ounces in 2022. With supply and demand for silver not being at its optimal point and silver mines producing only 25% of the silver required, the supply is coming more from other mining operations like the mining of lead, zinc, copper and even gold. The biggest risk to the price of silver is inflation. It would be bad for silver if inflation falls away too fast. There is a possibility that because of the recession, there could be a smaller industrial demand than what everyone is expecting. Inflation could fall away more rapidly if the U.S FED continues to take tougher and tighter stands and this would lead to a headwind for silver. It is still not expected that the price would drop to $18, things are looking up for silver investors this year.