Silver has had an underwhelming start to the year with the price largely treading water before falling sharply in February and has recovered some of those losses in March. As a result, silver is trading lower than it did at the start of the year even though the fundamental outlook in 2023 points to the precious metal continuing its upward momentum from the final quarter of 2022.
February saw the price fall from just under $24 an ounce to under $20 an ounce, a decline of about 17%. So if the downward trend had continued into March then silver could well have entered a bear market but last month’s gains have seen the precious metal avoid that fate.
Recent silver price action
Silver’s recent gains have seen the price climb back above $21 an ounce, driven by a weakening of the US dollar and the prospect of the Federal Reserve having to be more accommodative in its approach following the collapse of three US banks. At time of writing the silver price is above $25 / €23.
Silver often struggles at times of rising interest rates as shown by the precious metal’s multi-month slump from April to September last year when the Fed implemented a series of interest rate hikes of 75 basis points. At this point, silver was in a bear market with the price falling from above $26 an ounce to below $18 – or a decline of about 30%.
Silver price predictions for 2023
A recent LBMA survey of 30 analysts saw silver set for an average gain of 8.8% to $23.65 an ounce. One of the main drivers of this positive outlook is the demand for the metal in the energy transition with silver’s conductive qualities seeing it used in photovoltaics and in the batteries of electric vehicles. Industrial giant Heraeus forecast PV demand for silver to reach a record even with concerns over the health of the global economy.
Other factors affecting the silver market
Recent history shows how tied up silver’s performance is to the actions and words of the Federal Reserve and its officials, with the US central bank’s interest rate hikes and hawkish rhetoric outweighing silver’s strong fundamental outlook.
However, the fundamental case isn’t going away with India importing record volumes of silver in 2022. So strong was Asian demand for silver that holdings in London vaults were drawn down to the lowest level since the LBMA began recording the data and this trend has continued into 2023.
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Is investing in silver right for you?
Silver’s strong fundamental case hasn’t yet gained the attention it perhaps deserves while investors remain focused on how much higher global interest rates will climb. This raises the argument that the comparatively low levels that silver is trading at may represent a buying opportunity.
On the Kinesis platform, investors have the opportunity to purchase fully allocated silver in the form of Kinesis silver, which upon purchase, to which they become the sole legal title owner. Kinesis silver is vaulted in a fully insured, audited global network and can be redeemed at any time.
Irrespective of the short to medium-term price outlook, silver can play a role in any investor’s portfolio by offering diversification away from pure equities with the metal often performing well at times of stock market jitters.
Silver’s much lower price compared with its precious metal peer gold means the barriers to entry for an investor are far lower with silver offering many of the same qualities as gold, with the added benefit of its exposure to the key industrial shift of our time, the energy transition away from fossil fuels in favour of renewable options.
With thanks to Kinesis Money for their help with this article. Kinesis Money is a digital currency platform that allows users to transact in gold and silver-backed cryptocurrencies. It was created with the aim of providing a stable and reliable alternative to traditional fiat currencies. The platform allows users to buy, sell, and store precious metals like gold and silver, which are then digitised and converted into digital currencies, known as Kinesis Gold (KAU) and Kinesis Silver (KAG).
