Following a year where gold was in strong demand — which included a 10% increase in the annual global investment in gold coins and bars — investors are now expressing a growing interest in silver, according to Kevin DeMeritt, founder of Los Angeles-based gold and precious metals firm Lear Capital.
While the appetite for silver has increased over time, only a limited amount of the precious metal is in existence around the world, making it a progressively coveted item, DeMeritt says.
“Silver has become a highly in-demand asset, yet the available supply hasn’t vastly increased,” he says. “At times, It’s very difficult for us, as dealers, to actually go out and get silver bars and silver coins in big quantities.”
A sizable amount of silver — which serves as a crucial component in photovoltaic solar panels — is required for energy-related use, but that’s not the only pressing need for the precious metal.
In addition to solar utilizations, the following three factors could also have an impact on silver’s demand — and value — in the coming months.
Luxury Goods Consumption and Industrial Applications
All categories of silver-related demand reached record levels in 2022; physical precious metal investments increased by 22% last year, silver use in jewelry escalated by 29% and silverware utilizations rose by 80%, according to The Silver Institute’s latest annual survey.
The demand for silverware and silver jewelry fabrication in India — where, as employment and salaries rebounded from the pandemic, retailers moved to restock offerings — both significantly contributed to the overall increase in silver demand in 2022. The survey indicated Europe, too, was partially responsible for the rise; silver consumption within the continent rose between 2021 and 2022.
Industrial uses for the precious metal also rose 5% last year, with segments such as the automotive and construction sectors clamoring for silver.
Yet even with more being mined annually — in 2021, 822 million ounces were excavated, compared to 781 million in 2020 — meeting the overall demand for silver can be a challenging prospect.
“Silver is growing as an industrial asset,” Kevin DeMeritt says. “Batteries have silver in [them]; solar [elements have] silver — the industrial uses are just going through the roof.”
As with other assets, when the need for precious metal in various sectors exceeds the available amount of resources, the metal’s value can begin to rise — sometimes significantly, according to DeMeritt.
“If you add an increase in demand onto that physical supply that’s fairly limited, usually what you’re going to find is prices go up,” the Lear Capital founder says. “It’s economics 101.”
Recycling Activity
Recycling practices — which include refineries melting down items like jewelry or coins, or chemically separating them from their alloys — can help provide precious metal resources for various uses.
Last year, silver recycling activity increased for the third year in a row, escalating 3%, according to the Silver Institute.
Not all types of silver items, however, have been extensively repurposed.
Jewelry and silverware recycling, for example, only experienced moderate gains in 2022 — and it appears significantly more silver resources could potentially be recaptured through more frequent recycling practices. Reportedly, approximately $10 billion in gold, platinum, and other precious metals end up being thrown away every year.
The Economy
A number of investors view gold as a type of safe harbor investment, Kevin DeMeritt says, because it’s historically performed fairly steadily, compared to some other types of investments.
Silver has demonstrated a similar trajectory; both gold and silver prices, for instance, outperformed the Dow Jones Industrial Average and S&P 500 between 2001 and 2021, according to a Lear Capital analysis.
Silver, according to CNBC, has actually performed better than gold in the past during time periods when inflation was elevated — including in 1980, when inflation was a hefty 13.5%, and spot silver prices struck $49.45, a new high.
Due in part to the limited supply, in January, the news outlet predicted that, as the U.S. government continues to attempt to lower inflation — which, at one point in 2022, topped 9% and remains above the Federal Reserve’s 2% target — prices for silver might reach a level this year that hasn’t been seen in nearly a decade.
Kevin DeMeritt also has suggested we might see silver reach as much as $30 an ounce this year.
“The silver market is an incredible opportunity for a long-term investor looking, in the next three to five years, to get a great inflationary hedge — but also some great results with appreciation,” he states. “If we know there’s a recession coming, then the investment demand would [theoretically] start to pick up, and we’re starting to see that. There’s going to be demand for silver from industrial uses, regardless if investors purchase it or not. The advantages of silver, from our perspective, are starting to outweigh gold.”
Investors who’d like to incorporate physical silver assets into their portfolio can add the precious metal to a self-directed individual retirement account that can be set up via a simple and relatively quick process. More information on how a Lear Capital representative can help you initiate the first steps is available at learcapital.com.
“It’s very easy,” Kevin DeMeritt says. “You can purchase [a silver item] for home delivery, or place it into a depository; the other way to own it is to take a portion or all of a 401(k) or IRA and move it over to a self-directed [silver]-backed IRA. It takes about five or 10 minutes to put the paperwork together — and then it’s just moved to that physical silver IRA.”
