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Increased demand: Little brother of gold: Is physical silver becoming scarce? | message


• Gold and silver prices in bull mode
• Demand for gold fuels supply pressure for silver
• Silver index funds are enjoying great popularity


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Gold and silver soaring

Precious metals have been in increasing demand in recent months. The corona pandemic, which is still rampant and keeps the world in suspense, is responsible for this. But it is not only the current uncertainty that is driving investors into safe havens such as gold, the monetary policy measures of the central banks are also ensuring an additional flight into precious metals. Flooding the markets with additional liquidity increases the fear of inflation, which makes investing in silver or gold attractive, as both commodities are traditionally viewed as inflation protection.

Added to this is also due to the expansive Monetary policy triggered dollar weakness. Since precious metals are mainly traded in the US currency, a falling greenback will benefit countries outside the dollar area, which will further increase the demand for raw materials. In addition, the price of silver is more dependent on economic developments, as the metal is processed more often than gold in industry. In this way, the raw material can benefit from positive economic news.

All of this has led to the gold price starting a real record rally and recently even surpassing the round mark of 2,000 US dollars per troy ounce. The yellow metal’s little brother is in no way inferior to this rally. It recently reached its highest level in seven years, with a price of at times $ 29.43.

Silver supply is becoming scarce

However, the high demand for the little man’s gold also means that it is becoming increasingly difficult to get hold of silver bars. Philoro co-boss Christian Brenner confirmed this to the Handelsblatt: “It is currently difficult to get silver products from a Swiss refinery”. And The Silver Institute sees a silver deficit in the market for the first time in five years, as reported by Bloomberg.

Interestingly, this is not only due to the increased demand for silver. Since gold is currently in even greater demand, producers of precious metal bars would prefer to manufacture gold products in order to take advantage of the current run on gold. Silver falls by the wayside, which leads to a shortage of supply and thus to longer waiting times.

Silver index funds with great popularity

But not only private investors who want to protect themselves with small amounts of silver against any inflation, are creating increased demand. In particular, it is index funds backed by physical silver that act as drivers here. For each fund share sold, the asset manager stores a fixed amount of silver in a safe. Conversely, the increased inflow of money into such silver index funds also means that there is less silver in circulation, even if the investor himself does not have any argent. According to data from Bloomberg available to Handelsblatt, the amount of silver deposited by asset managers since the beginning of this year has risen to 900 million ounces.

Are silver mines threatened with new closings?

The corona crisis is also likely to cause further supply pressure on the raw materials market. Various silver mines in Peru and Mexico, which produce 40 percent of the world’s supply, have already had to close for some time. Many mints have not yet returned to full capacity due to sanitary regulations and precautionary measures. In addition, in view of the renewed increase in the number of infections worldwide, it cannot be ruled out that gold and silver processors will have to close their doors again if new exit restrictions are imposed. Therefore, the Silver Institute estimates that mine production from Latin America is likely to decline by 13 percent this year.

Silver price forecasts increased

In the course of the increased demand for gold’s little brother, various experts have also increased their price estimates. The Swiss bank Vontobel sees the price of silver at around $ 40 per troy ounce in the coming years. The US investment bank Goldman Sachs sees the price rise to $ 30 in the next twelve months. Whether the raw material analysts are right with their estimates will largely depend on the further development of the corona crisis. editors

More news on the gold price

Image Sources: Margaret M Stewart /, Julian Mezger for Finanz Verlag

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