This year started quite volatile for the silver market. In January, prices fluctuated in the $ 3 range, but according to US Mint sales data in January, physical demand for the precious metal has risen, despite volatility.
US Mint sales data show $ 5 million worth of silver was sold last month – the best start to the year in five years. In addition, sales of silver coins increased by 4.6% from 4.78 million ounces sold in January 2021.
January is traditionally the busiest month for the US Mint. But, according to economists, investors are returning to the physical market because consumer price pressure continues to rise along with growing global geopolitical uncertainty.
MKS PAMP Precious Metals Strategist, Nicky Shiels, said that as long as inflation remains an issue, and with the disputed US midterm elections approaching, demand for all retail precious metals remains strong. According to the company, premiums on silver coins are around $8 an ounce, a testament to how strong the demand for the precious metal has been.
At the same time, Saxo Bank's Head of Commodity Strategy, Ole Hansen, believes that silver's weak performance against gold continues to make it an attractive metal for investors to physically own.
The gold/silver ratio has steadily increased last year and continues to fluctuate in the range of 80 points after a sharp decline in 2020. This means that for a given period of time, it takes about 80 ounces of silver to equal one ounce of gold. The average historical value of the coefficient is about 50 points.
Due to the growing interest and desire to develop clean energy, there is also a growing interest in silver, as it is an important metal in the use of solar panels. Last year, the solar energy sector represented about 11% of the total industrial demand for silver, consuming more than 100 million ounces of this precious metal. This year, consumption is projected to grow to about 140 million ounces.
Silver's volatility is likely to remain the same this year on expectations of the Fed's hawkish position.
According to Jonathan Butler, Mitsubishi's head of business development, rising consumer prices, and industrial demand should provide some support for silver through the end of 2022.
Moreover, he said that the average price of silver this 2022 will be $23.50 per ounce.
