Silver price forecast 2020 and beyond

Investors have always understood the allure of precious metals, with gold taking the crown. But what about its equally shiny cousin, silver? We look at where silver’s price could be heading in 2020.

Investors have always understood the value of silver. Not only has the precious metal been used for trading for 5,000 years, it has even acted as coinage for many countries. Indeed, the UK’s currency owes its very name to silver. A pound coin originally weighed one troy pound of sterling silver, so it became known as a “pound sterling”.

But is silver still a good investment choice today? And will the silver price forecast for 2020 be favourable?

Silver and gold

Often unfairly dubbed ‘poor man’s gold’, silver has always taken a back seat to its more valuable metallic cousin. With gold currently trading at $1,477.80 (£1,145.11) per ounce, while the same weight of silver trades at $17.14, there is clearly a huge disparity in their relative values.

Fortunately, there are huge advantages in silver being the cheaper option. Not only is it a more affordable choice in the jewellery sector, but it also has the benefit of being highly sought after by numerous other industries too.

Industrial uses

Like gold, silver is ductile with excellent thermal and electrically conductive properties, making it invaluable to the electronics industry. What’s more, silver’s use in industry has grown significantly in recent years.

Currently, almost half of all silver produced is used for industrial and technological purposes. The metal can be found in anything from printable electronics to conductors and catalysts. The automotive industry uses it for silver-coated contacts and it is to be found in almost every computer and mobile phone.

And while the growth of digital photography has drastically reduced silver’s use in the photographic industry, the metal has found new markets through its use in the manufacture of LED chips, RFID chips (used for tracking parcels worldwide), touchscreens and photovoltaic cells (used in solar energy).

What’s more, silver is extremely good at killing bacteria, and therefore of benefit to the medical industry. Not only is it used in equipment and bandages, but it has also been used to combat dangerous “superbugs” that have grown resistant to antibiotics.

No wonder the Silver Institute calls it “the indispensable metal”.

Silver production and consumption

Mexico is the world’s leading producer of silver, extracting 19 per cent of the global output from its mines. China and Peru follow with 15 per cent each.

As for consumption, the US leads the way, using 21 per cent of the world’s silver - between six and eight thousand tonnes per year. It is followed by China, Japan and India with Germany and Italy being Europe’s major silver consumers.

The price of silver tends to move in a similar way to that of gold, albeit a little more slowly. Investors often observe that when gold hits the headlines, silver soon follows suit. However, as silver is a very small market, any financial change to the industry can have a greater effect on its price and it is more volatile than gold. Silver’s price does tends to fall much further than gold’s, but it can also rise more quickly and substantially in a bull market.

Silver’s price history

Commodities such as gold and silver have long been viewed by investors as safe havens in times of political or economic turbulence. A weakening dollar increases the value of other currencies, which increases the demand for commodities such as silver and drives up the price. So when the dollar is weak, the price of commodities moves higher.

During the financial crash in 2008, silver rallied from its price of $12.24 per ounce on September 6, 2007, to $20.22 by March 2008. After a correction, the market then saw silver rocket to a 31-year-high of $48.70 on April 28, 2011.

Terry Hanlon, president of precious metals trading firm, Dillon Gage Metals, told the UK’s Telegraph newspaper at that time: “Many commodities have climbed because of expectations that improving national economies will boost demand for materials. And with most commodities prices in dollars, the greenback’s decline against other currencies made raw materials cheaper for foreign investors to buy. US investors bought silver and gold as a way to hedge against further erosion in the dollar’s buying power.”

Indeed today many investors view silver less as a safe haven than as a hedge against inflation and an insurance policy against global volatility.

Silver price prediction

Silver has been in something of a bear market since 2013, with many analysts now reckoning on a positive silver price forecast as it is well overdue a rally.

Chris Gaffney, president of world markets at New York based TIAA Bank told Marketwatch in July, “Gold has had a pretty good head start on silver during the first half of 2019”, but added that, “silver will outperform gold for the rest of the year”.

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Factors affecting future silver price predictions

Of course, many factors affect the price of commodities such as silver. Fluctuation in supply and demand has a clear impact. With constant demand but a dwindling supply, silver will become increasingly valuable.

Concerns regarding the Trump administration have seen many investors returning to silver and gold, while geo-political disputes such as the US-China trade war and Brexit also drive price change.

For example, silver saw its price rally to $19.30 per ounce on September 4, likely due to uncertainty regarding the US-China trade deal. In contrast, a strong US dollar, coupled with the US Federal Reserve raising interest rates four times in 2018, resulted in silver’s price dropping by almost 14 per cent over that year.

Silver price forecast

Despite the price falling to $17.14 per ounce on November 20, the silver price forecast from many analysts for 2020 is mildly bullish - based on the view that it has bottomed out and is on its way up.

Johan Wiebe, analyst at Thomson Reuters believes silver will reach $17.50 per ounce in 2020. Colin Hamilton of Bank of Montreal, reckons we could see $18.60, while European precious metals retailer, Degussa, goes as far as to suggest $23 per ounce.

Silver investment forecast

But some are more bullish than others. Keith Neumeyer, CEO of First Majestic Silver, told Kitco News in 2018 that he considers silver to be under-rated and under-valued in comparison to other metals. Describing silver as a “strategic metal, needed for all sorts of applications”, he believes we could see prices of $130, and perhaps even $200 per ounce in the future. Neumeyer also expects a steady increase in mining efficiency over the next 10 years, which will be reflected in silver’s value.

Both gold and silver have rallied since the Federal Reserve cut rates for the third time in October 2019. EB Tucker, director at Metalla Royalty & Streaming, predicts that as gold has started to rally, “at some stage silver wakes up and plays catch up. That’s a move worth owning,”. He adds: “We could easily see $20 per ounce.”

Silver’s price in the next 5 years

Looking ahead, agency considers the long-term silver forecast. While they see the precious metal’s price steadily rising to a high of $22.69 per ounce by July 2020, they believe it will then decrease and fluctuate within the $18-$20 range between the end of 2020 and 2024.

Silver future price: Should we buy?

One tool analysts use is the Gold:Silver ratio. This sets out silver’s price in relation to gold. If it costs $30 for an ounce of silver and $1,200 for an ounce of gold, the ratio is 40:1.

As it is estimated that there is 17 times more recoverable silver than gold, the general ratio is 17:1. So we can see that the higher the ratio, the more cheaply the market prices silver in comparison to gold.

Some investors believe it can be considered a good time to buy silver when the ratio exceeds 80. So with the ratio at almost 87 on November 20, should we all now be jumping in?

Tokenised securities and ETFs

Investors wishing to have some silver exposure don’t have to buy bullion. A low-cost way to invest can be via an exchange traded fund (ETF) that tracks the price of silver in an index, such as the MSCI ACWI Select Silver Miners Investable Market Index.

Alternatively, investors can buy tokenised securities from companies such as By swapping cryptocurrency or fiat cash for tokenised securities investors can buy as much or as little silver as required. Using blockchain technology means the settlement is in real time, making tokenised commodities quick, easy and cheap to trade.

We can see that the demand for this versatile metal is growing. Not only does each of the one billion mobile phones produced globally require one third of a gram of silver, but the demand for solar panels using silver as a conductive ink is also rising.

Despite growing demand and market watchers’ belief that silver is overdue a rally, few seem to believe the metal will increase to quite the extent suggested by Neumeyer. Nonetheless, with growing economic and political turmoil taking their toll on the dollar, silver could still be worth adding to our portfolios.

FURTHER READING: Silver price forecast: has this precious metal been oversold and undervalued?

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