Silver supply dipping as demand poised to skyrocket

Current price of silver

The demand for silver as a precious metal has always been overshadowed by gold’s high demand. This is because silver has much lesser supply capacity and is also more vulnerable to market volatility. The last price hike witnessed by this metal was in 2020 when the silver index grew dramatically by 47%. Unfortunately, this strength was short-lived and silver prices started to decline soon afterwards. 

The current price of silver is USD 21.72 per ounce which is a dramatic fall from the average price of USD 25.14 recorded in 2020. On the other hand, the gold index has seen a shallow but constant overall growth within the last two years. Market experts believe that the two precious metals have collectively performed well compared to the overall market index which fell by 16.65% since 2020.

While the silver supply boosted in 2021 after the price hike, it soon declined due to various reasons. The mining of silver is heavily aided by base metal production, which is dependent on their industrial demand and price. When the selling price of copper, zinc and lead decreased, silver mining was also reduced, which dampened its supply in the market. Furthermore, silver miners have become disincentivized due to the high cost of production caused by rapid inflation. This has also discouraged the attempts to find new silver mining sites.

Contrastingly, the market demand for silver is soaring like never before. This is mainly because countries are adopting environment-friendly technology which uses silver as a raw material. Jewellery and silverware industries, among others, have also put forth an increasing demand for the metal since Covid-19 restrictions were lifted.

Experts believe that the diminishing supply of silver combined with its growing demand will positively impact its stock market index. Hence, silver traders are expected to make huge profits in the long term.