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Commodities

What does 2018 have in store for silver?

Johann Wiebe  Lead Metals Analyst

Johann Wiebe  Lead Metals Analyst

Even just a month in to 2018, The Silver Institute can already tell it will be an active one for silver prices.

With applications in fashion, industry, currency and investment, silver can be many things.

Predictable isn’t one of them.

Because silver has so many uses, its demand ebbs and flows with great frequency and its price can see-saw rapidly without much warning. Using The Silver Institute’s 2018 Silver Market Trends report, here’s a look at what the coming year may have in store for silver.

An Egyptian seller checks silver rings on display at a jewellery shop in a market in Cairo, Egypt. REUTERS/Mohamed Abd El Ghany
An Egyptian seller checks silver rings on display at a jewellery shop in a market in Cairo, Egypt. REUTERS/Mohamed Abd El Ghany

Demand across the spectrum

Three of the biggest demand sources for silver are:

  • Jewelry: Silver’s neutral color makes it adaptable and more flexible (visually speaking) than other precious metals, like gold and platinum. Accordingly, it can be used for a wide array of adornments and accessories. As such, The Silver Institute expects consumer demand for silver to rise by 4 percent in 2018, following a rise of 1 percent in 2017.
  • Industry: Most of the global silver supply – around 60 percent – is used for industrial purposes. Its conductive abilities make it ideally suited for electrical uses, like electric car components and photovoltaic panels for solar power. Thanks to surging demand for the sorts of sophisticated tools and instruments that silver is used to make, industrial demand for silver is expected to grow in 2018.
  • Coins and bars: Red-hot cryptocurrencies and a flourishing stock market took some of the luster off precious metals as an investment product. The demand for silver coins and bars dropped by almost half in 2017. The decline shouldn’t be that pronounced in 2018, but if predictions of a generally favorable global economy come to pass, demand for silver as an investment product will either flatline or continue to deflate in the coming year.
Silver products are pictured in a second-hand silverware shop in Bordeaux, France. REUTERS/Regis Duvignau
Silver products are pictured in a second-hand silverware shop in Bordeaux, France. REUTERS/Regis Duvignau

Sources of silver

While there are a significant number of silver -producing operations in Australia, Poland and Russia, most of the silver mined in the world comes from Mexico and Peru. Production disruptions in South America were one of the reasons global mine supply fell by 1 percent in 2016 (the first decline in 14 years of growth) and an estimated 2 percent in 2017, coming to a halt at 870 million ounces (Moz).

Interestingly enough, only about 30 percent of output comes from primary silver mines, while the remaining 70 percent is obtained as a byproduct from base metals operations like copper, lead, and zinc. Since base metal prices are expected to see a “strong recovery” in 2018, an increase in base-metal mining may mean a swell in silver supply, too.

Silver can also be drawn from scrap supply, such as melted-down silverware and coins. Scrap supply has been declining since 2011 and will probably stabilize at 150 Moz this year.

A worker looks through industrial scrap materials at a recycling plant, in Honjo, north of Tokyo. REUTERS/Yuriko Nakao
A worker looks through industrial scrap materials at a recycling plant, in Honjo, north of Tokyo. REUTERS/Yuriko Nakao

Price peaks and valleys

The Silver Institute doesn’t mince words: “This year, we expect the silver price to experience a volatile ride.”

Last year, the price of silver fell by just half a percent to US$17.05 per ounce. Just one month into 2018, the price has risen above last year’s average. Even with that strong start, there’s room for silver to improve, particularly if investment in precious metals rises.


Learn more

Read the full 2018 Silver Market Trends report.

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