Silver prices could touch a 9-year high in 2023 — with a bigger upside than gold

Silver prices could touch a 9-year high in 2023 — with a bigger upside than gold

A one kilogram silver bar, a two hundred and fifty gram silver bar, and a five hundred gram silver bar, all produced by Swiss manufacturer Argor Heraeus SA in Budapest, Hungary, on July 20, 2016.

Akos Stiller | Bloomberg | Getty Images

Prices of silver could hit a nine-year high of $30 per ounce this year — possibly outpacing gold prices.

Insufficient supplies of silver as well as its tendency to be a better performer than gold in periods of high inflation are key drivers supporting the outlook, analysts told CNBC.

The last time spot silver touched $30 levels per ounce was in February 2013according to closing price data from Refinitiv.

“Silver has historically delivered gains of close to 20% per annum in years inflation is high. Given that track record, and how cheap silver remains relative to gold, it wouldn’t surprise to see silver head towards $30 per ounce this year, though that will likely offer significant resistance,” said Janie Simpson, CEO at ABC Bullion.

Spot silver prices notched a record high of $49.45 in 1980 against the backdrop of a 13.5% inflation rateup from around $4 in 1976, when the rate of inflation was cooler at 5.7%.

The precious metal last traded $24.02 per ounce, against the backdrop of an inflation rate of 6.5%.

Silver shortage

No silver lining for silver supplies

“We hit peak silver supply back about five, six years ago. Silver production on a worldwide basis has actually been dropping, and we’re not seeing as much silver produced from the mines,” said Randy Smallwood, president of Wheaton Precious Metals.

According to trade group The Silver Institutethe supply of silver from mine production in 2022 was 843.2 million ounces, which was still shy of the decade’s peak of 900 million ounces in 2016.

The supply of silver, which is largely produced as a byproduct of lead-zinc, copper and gold mines, does not generally respond as quickly to demand.

Freshly cast 30 kilogram silver ingots cooling in their molds at the JSC Krastsvetmet non-ferrous metals plant in Krasnoyarsk, Russia, on Monday, July 12, 2021.

Andrey Rudakov | Bloomberg | Getty Images

“When silver prices go up, it’s not like the silver mines can increase production, because the silver mines only supply about 25% of the silver,” Smallwood said, adding that the market often relies on the lead-zinc mines to satisfy the higher demand.

However, he maintained that while it wouldn’t be surprising to see silver touch $30 per ounce, he does not think that price will hold. He calls for prices to “stay comfortably over $20 per ounce.”

“I’m very bullish on gold, but I’m even more bullish on silver,” Smallwood said.

‘Headwind for silver’?

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