The coming of the coronavirus and COVID brought interesting twists to the commodities markets. It’s only fitting to assume that while there are hopes for an improved economy in 2022, individual commodities and currencies will observe parallel paths in terms of fortune. Silver remains a valuable commodity, and it’s important to consider investor outlook for it in 2022.
A Backstory for the Silver Market in 2022
Central banks have routinely hinted at raising interest rates and easing fiscal policies in 2022. As a result, they have effectively planted the seeds for mounting inflation and macroeconomic uncertainty. In addition, a stronger US dollar has increased the pressure on the precious metals market.
However, in response, silver and the entire precious metal markets had held ship, defying expectations of a price rally. So does this mean 2022 is the year silver will fulfil its nlong-standing potential?
The primary drivers for the price of silver include:
- Monetary policy
- Physical consumption of silver
- Silver mining production
- US dollar value
The trending price for silver dipped sharply lower in June on the back of the Fed’s bearish statements. Investors typically raise their exposure to gold and silver when interest rates go lower, and inflation rises. It is their way of preserving the value of their money from low interest rate payments and erosion.
However, investor interest in silver may have dropped overall, and inflation, transitory.
We’ll now turn our attention to the predictions of analysts and investment experts.
Expert Predictions on Silver
Nicky Shiels, an MKS-PAMP analyst mentions in a recent outlook report that the gold-silver ratio rose from 67 to 77 during the summer. The ratio is the number of ounces of silver you need to buy an ounce of gold.
The continuing excess supply of silver stems from a primary and by-product output from mines. In addition, physical prices have stayed tight due to supply chain disruptions and strong industrial demand for a premium silver grade.
Therefore, the retail investor demand for silver coins is primed for a five-year high. Analysts continue to balance expectations that inflation could support price against monetary policy that drives prices lower.
Capital Economics’ experts, however, expect a stronger US dollar, besides lower physical demand and higher US Treasury yields, to translate to expectations of poorer performance over the next few years.
The Australian group, ANZ, analysts predict silver will top $24 on average well into H2 2022. Their monthly gold and silver outlook expects negative real yields and inflation expectations to support investment demand.
Going on, they expect the dollar to stay weak, as other central banks rally ahead of the Fed in their rate hikes and tapering.
In an exciting twist, WalletInvestor, an algorithm-based forecasting service, suggests that silver could sit at $23.90 per ounce when 2021 ends and $27.96 in 2022. The analysis agrees with rising price predictions until 2025.
Bringing it Home: It’s Your Call
Analyst commentary or predictions can still go wrong. Silver remains a vital part of any investment portfolio. Yet, there’s no replacement for personal research, carefully accounting for all relevant market conditions.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only.