Silver price to beat gold in 2023? Precious metal plays catch-up on strong demand, ETFs remain missing puzzle piece silver outlook
Welcome to Kitco News' 2023 outlook series. Uncertainty continues to dominate financial markets as central bank monetary policies push the global economy into a recession to cool down inflation. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2023.
Silver saw most of its gains in the first quarter of this year, hitting $27 an ounce, which is similar to gold's trading pattern. Then it saw losses for six months, hitting a 2-year low of $17.50 in September. In the fourth quarter, prices started to pick up as investors began to anticipate a pivot by the Federal Reserve.
LaForge noted that commodities have been in a supercycle since 2020, with silver looking to play a special role, especially considering how cheap it is relative to other commodities."When you are in supercycle, you often find high-beta plays do better. Between 1999-2011, silver did much better than gold."
The biggest macro driver supportive of higher prices is a Fed pivot. Even though an actual pause, a slowdown, or even cuts might be months away, precious metals are already anticipating that and are starting to move. Industrial demand for silver was at a record in 2022, reaching 539 million ounces, according to Metals Focus managing director Philip Newman. With so many countries focused on energy security, silver saw new demand come from solar panel installations, which hit new highs this year, Newman added during an LBMA webinar summarizing silver.
The outlook for next year sees all these factors remaining in place."Industrial demand should continue to benefit from electrification of the vehicle fleet, 5G technology, and the government-driven rollout of green infrastructure such as photovoltaics. Physical investment demand should be buoyed unabated by fears of high inflation," said Fritsch.
The U.S. market remains a solid support factor, especially with additional funding coming from the Inflation Reduction Act, Butler pointed out."We are seeing a great deal of investments into PV and electrification. That is ultimately good for silver. Meanwhile, the U.S. economy is bubbling along with some decent growth rates, which helps lift up conventional applications for silver in electronics and chemical applications.
Other reasons included anemic gold price performance, LBMA silver vaults providing ample supply, and the physical market being much smaller than the professional market, O'Connell pointed out.
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