An imbalance exists in the silver market

In the previous week, silver prices dropped 5% to $20.8 an ounce, continuing their downward trend from a five-month high of $21.7 on November 14. However, given that silver output has fallen into a shortfall compared to demand, the metal’s prices, which have fallen 10.3 percent year to date, are anticipated to rise. The Silver Institute predicts that mine production will rise by 2% this year to 843.3 million ounces (moz), up from 822.6 moz in 2017.

However, demand for goods like jewels, investments, and the industrial sector is anticipated to increase by 5% this year to 1,101.8 Moz (1,049 moz in 2021). This results in a 71.5 Moz deficit for the market balance, up 38% from 2021 when it was 51.8 moz. If investments are not included in the computations, the net market balance will be negative, down from 116.7 million to 96.5 million.

“Approximately 870 Moz (or 26,500 tonnes) of silver are supposedly kept at the LBMA, valued at $16.3 billion. Since reporting began in July 2016 there has never been less silver stored in vaults, according to Wadhwa. About 18,000 tonnes of the 26,500 tonnes held by the London Bullion Market Association are in silver exchange-traded funds (ETFs).

Silver possesses the qualities of both a precious and an industrial metal, and right now, both of these factors are prompting a shift, according to Narne. “Gold-silver ratio is another crucial element to consider. The ratio dropped from its most recent peak of 97 to 80, supporting the advance in silver, he claimed. According to Wadhwa, rising consumption is the primary cause of the silver shortfall. He reported that sales of silver coins and bars for investments increased by 36% to 278.7 million ounces, the highest level since 2015.

According to the MOFSL official, a 16 percent increase in overall demand has led to the largest shortfall in decades. “As buyers took advantage of the low costs to rebuild stockpiles depleted in 2020 and 2021, demand in India nearly doubled in 2022. The increasing demand from sectors like solar power and the auto industry is anticipated to cause more silver supply deficits in the years to come, but not to the same extent as in 2022,” he said.

Narne predicted that silver prices in India will increase to 64,500 INR per kg in the medium term and to 73,000 INR in the long run. By the second half of 2023, “we estimate silver prices to cross 80,000-82,000/kg level,” he stated. Silver’s opening price in Mumbai on Monday was 60,600, down from the previous day’s closing price of 61,320. (November 19).

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