Page 34 - Bullion World Volume 02 Issue 10 October 2022

Bullion World | Volume 2 | Issue 10 | October 2022

Moz have an inverse relationship with silver (and gold) prices.
600
Should the dollar post further gains from current levels,
500 2021 2022F
this may result in additional investor selling in the silver
400
market.
300
200
We think the annual average silver price for 2022 is
100
$21.20.
0
Industrial Investment Jewelry Silverware Photography De-Hedging
To conclude, the silver market was in a surplus over
Silver Supply
Moz much of the 2010s, which resulted in a rise in silver
Silver mine production is anticipated to rise in 2022. inventories held in over-the-counter (OTC) markets and
600
Growth in silver output will mainly come from primary commodity exchange vaults. Metals Focus’ data show
Moz
US$/oz
500
2021
2022F
silver mines, massive operating mines such as Fresnillo
1,200
35
400 that silver above-ground stocks rose by around 310 Moz
in Mexico, Rochester in the United States the expected
1,000
300 30 from 2010-2020. These accumulated inventories are
re-start of mining at Uchucchacua in Peru. In addition,
200 800 believed to have fulfilled the deficit since 2021.
ramping large projects such as Juanicipio and Las 25
100 600
Chispas in Mexico will support this growth.
0 20 Last year, the silver market recorded a physical deficit
400 Industrial Investment Jewelry Silverware Photography De-Hedging
which Metals Focus expected to grow significantly this
Mine supply is expected to grow by 1.8% to 835.4 Moz
15
200 year. Furthermore, the consultancy forecasts that the
and recycling by 4.8% to 184.4 Moz in 2022.
0 10 silver market will remain in a structural deficit for the
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022F
foreseeable future. So the critical question is, can the
Moz US$/oz
Mine Production Recycling Hedging Official Sector Silver Price
silver market “supply” enough silver to fill this deficit?
1,200 35

1,000 Looking first at globally identified silver bullion stocks,
30
these have fallen to around 1.4bn ounces, a five-year
800
25
low. One reason for the decline in 2022 is the strength of
600
silver demand in India, which is on the course this year
20
to import a record level of silver bullion. Added to this are
400
15 sizeable above-ground stocks of near-market silver. This
200
includes ETF holdings, retail coin and bar stocks (much
0 10 of which are held in the U.S. and India), and consumer
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022F
jewellery stocks held in price-sensitive markets, such as
Mine Production Recycling Hedging Official Sector Silver Price
in India and elsewhere in South and East Asia. At certain
Silver Price price levels, a portion of stocks could be mobilised to
Our consultants at Metals Focus remain cautious about help fill the silver market deficit.
the silver price for the rest of the year. Outside the U.S.,
the economic outlook remains challenging. In China, In 2021 the deficit was 49 Moz, and this year, we project
a problematic property sector and the country’s zero it will be significantly higher, at 146 Moz.
COVID policy have all resulted in cuts to the GDP growth
forecast. In Europe, the scope for higher natural gas Make no mistake; there are great things ahead for silver
prices during winter and its impact on industrial activity in the future.
makes the bloc’s economy more vulnerable. These could
continue to undermine investor interest in industrial
commodities, affecting silver.
This year’s challenge for silver prices is monetary
tightening adopted by central banks -- the U.S Fed, in
particular -- to rein in inflation. This activity has led to a
surge in the dollar index and bond yields, which tend to

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