Silver has started 2023 on a positive note. As well as benefiting from expectations of a more dovish Fed, the abrupt end to China’s Zero-COVID policy has bolstered industrial metals, which to some extent has also lent support to silver. This combination will help generate the high for 2023 of $24.80, which we expect to see during the first half of this year.
However, looking further ahead, we believe that silver will experience a softer tone, for the reasons outlined above in the gold commentary. As real rates rise, investors are expected to liquidate silver positions, driving the price down to $19.80 as we approach year-end.
That said, there will be a partial offset as the silver market records another physical deficit. Even though this will be lower than 2022’s record deficit, in absolute terms, it will still be exceptionally high, helping to underpin the price. This in turn will reflect a new high for industrial demand, and robust totals for every other key area of silver demand, namely jewellery and silverware fabrication, as well as coin and bar demand. Overall, silver is forecast to average $22.70 this year. Although this will be down 10% year-on-year, it will still be the third year in succession that silver has averaged over $20.