Gold News

Spotlight on Silver Investments

2 Mins read

The past 12-18 months have witnessed some incredible developments in the silver investment market, including a dramatic improvement in investor activity. Looking at the combined value for ETPs, coin and bar demand and net managed money positioning offers some indication of how investment has fared. For 2020, this is estimated to have risen by around 20% to around $10bn, the second highest total recorded by Metals Focus over the past decade, and bettered only by 2012. Although the above figures do not include some key elements — such as futures trading in China or India, nor over-the-counter activity — they are still representative of the overall strength in silver investment last year.

*Combining annual changes in ETPs, annual coin and bar investment, and annual changes in net managed money positions; Source: Metals Focus, Five-Year Silver Forecast

The growth was especially strong in ETPs, followed by retail investment (coin and bar). The former rose by 331Moz last year, a record performance for silver ETPs, in the process breaking through one billion ounces for the first time. With regards to bar and coin demand, according to Metals Focus’ estimates, this sector achieved a four-year high of over 200Moz.

Finally, it is worth highlighting the role of silver jewellery, as this is often considered an investment in some parts of the world. This applies to low margin pieces that are sold by weight in price sensitive countries. Most important in this regard is the Indian market, which is comfortably the world’s largest silver jewellery fabricator, and accounts for some 25% of the global total. In keeping with many other countries, Indian silver jewellery demand faced heavy losses in 2020 as a combination of the pandemic and record high Rupee silver prices weighed on the market. However, as lockdown restrictions ease considerably and disposable incomes start to improve, this should help generate a partial recovery in Indian demand.

Turning to early 2021, the growth in silver investment has undoubtedly carried over from last year. The much-publicised social media campaigns have translated into significant gains for silver ETPs and coin and bars demand. For the former, global holdings have risen by 77Moz this year through to end-March. Compared to annual changes over the 2010-20 period, this year has already achieved the fourth largest gain. Coin and bar demand is more difficult to judge given the ongoing and persistent weakness in India, although this has been comfortably offset by significant growth in the US — the world’s largest silver coin and bar market.

Retail investment

Retail investment in silver (coins and bar demand) continued its recovery last year after falling to historic lows during 2017-18.

The sector then burst into life this year, initially as a social media buying frenzy emerged

However, the industry was quickly beset with product shortages, in part due to logistical restrictions, because of the pandemic, in being able to move coins and bars between locations.

While social media discussions have abated, silver coin and bar demand has remained extremely strong, especially in the US.

This upside has offset weakness in India where investor liquidations have continued.
The ongoing strength in the US coin and bar market, which also reflects some supply issues, has seen product delivery lead times become extended and premiums remain elevated.

Source: LBMA

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