by Peter Schiff, Schiff Gold:
Holdings of silver in silver-backed Exchange-Trade Products (ETPs) rose by 297 million ounces through the first three quarters of 2020, according to data released by the Silver Institute. That’s nearly triple the level of silver inflows seen during the same period in 2019. Meanwhile, investors also had a strong appetite for silver bullion coins and bars.
In a press release, the Silver Institute said, “Overall, this reflects both silver’s role as a safe haven asset and as a leveraged play on gold, as some investors expect silver to outperform the yellow metal.”
Silver ETP holdings through the end of September stood at 1.026 billion ounces, slightly off the high of 1.052 billion ounces recorded in August. But the trend is heading upward again. As of Oct. 12, silver ETP holding totaled 1.046 billion ounces.
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Silver bullion coin demand was up 65% over the first three quarters. US and German markets led the way with both seeing double-digit gains over the nine-month period.
Silver bar demand also rose sharply, also led by the US and Germany. According to the Silver Institute, the growth in those markets was partly offset by weaker demand in India, particularly in recent months where price-led liquidations have emerged.
Industrial silver demand has shown some signs of recovery in the wake of government-mandated coronavirus shutdowns. But even with the recovery continuing into the fourth quarter, industrial demand is expected to soften by about 10% year-on-year, “entirely as a result of the COVID-19 pandemic.”
The Silver Institute projects that “the macroeconomic backdrop should continue to underpin silver investment demand for the rest of 2020.”
Dramatic monetary easing policies and fiscal stimulus measures seen in several key markets, and potentially again in the US before the end of 2020, could boost inflationary expectations and weigh on the US dollar, continuing to raise the appeal of safe-haven assets, including precious metals.”
Last week, Goldman Sachs released a pair of reports advising to dump dollars and buy silver.
Silver is coming off its best quarter since 2010 and the fundamentals indicate there is still plenty of upside.
The silver-gold ratio remains high, indicating that silver is still historically undervalued compared to gold. After closing to under 70-1 in August, the spread has been running closer to 80-1 in recent weeks.
On the supply side, mine output fell precipitously with the COVID-19 economic lockdown. Many major mines were forced to shut down due to the pandemic. Analysts at the Silver Institute say they expect mine supply to continue its four-year slide. Even with most mines back online, the institute projects a 7% decline in mine output this year. Global mine production fell by 1.3% in 2019.