The silver is ready for a great escape.
January saw the price of silver swing wildly, but despite this, demand for the metal is on the rise, with January seeing the US coinage 5 million ounces of silver in January, the best start to the year since 2017. Sales of silver coins are up 4.6%.
“Overall, we continue to see strong demand for all retail precious metals products, as long as inflation remains a concern and we move closer to a contentious midterm election in the United States,” said Nicky Shiels, precious metals strategist at MKS PAMP.
Both gold and silver should benefit from continued market volatility, inflation and geopolitical risks such as the situation in Ukraine. As safe-haven assets, precious metals can provide an important hedge against calamities of all types.
Ole Hansen, head of commodities strategy at Saxo Banks, notes that silver has underperformed against gold, making it an attractive option for investors looking for a breakout. “We have no idea where monetary policy is going to take us and there’s a lot of fear around the geopolitical situation with Russia,” Hansen said. “If you think things are going to get worse, it might be a good idea to hold physical assets.”
The silver’s long-term outlook is supported by the pivot to green energy that is needed to reduce the impacts of climate change. Silver functions as both a precious metal and an industrial metal, and it is an essential component for a number of environmentally friendly technologies, such as solar panels. Last year, the solar sector accounted for 11% of industrial demand for silver, more than 100 million ounces of the precious metal. Experts expect consumption to increase by around 140 million ounces this year. The push towards net-zero emissions will also benefit electric vehicles, which are more cash-intensive than their counterparts.
Investors interested in silver can gain exposure to the physical metal through the Sprott Physical Silver Trust (PSLV).
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