Silver started the year 2022 around $23, went up to $27 in March and prices flipped to trade around $18 by end of August and now we are back trading above $23 in December. Similarly in domestic terms, silver prices started the year around Rs 62000, then touched Rs 73000 in March, fell back to Rs 52000 in August and now prices have rallied back above Rs 68000 due to rupee depreciation during the year.
The first quarter of 2022 was positively impacted by geopolitical tensions between Russia and Ukraine. The second and third quarter was negatively impacted by aggressive FED rate hikes. Since the fourth quarter, we have had strong demand from retailers and wholesalers, a supply deficit and a hawkish tone of FED.
The demand outlook for silver remains solid amid the global green energy push, boosting its industrial demand. The fundamentals of Silver have become very strong in the last quarter of 2022:
• Global consumption of the white metal is expected to hit a new all-time high in 2022, driven by post-pandemic industrial and physical investment demand. India’s silver imports are estimated to be at record levels of around 10,000 tonnes in 2022 on the heels of a rise in jewellery consumption
• Open Interest on silver is below August of 2010 when Silver moved from $18 to $50 an ounce in 9 months. The big shorts that have been stopping the price of silver from going up have covered their shorts and they are out of the market now
• According to the Silver Institute, the Silver market is in a deficit of 71.5 Moz in 2022, a 38 per cent rise from 2021 when it was 51.8 Moz.
• Silver Inventory at COMEX and LBMA warehouses is shrinking continuously and stands at a multi-year low.
• As per the CFTC report, commercials and non-commercials have extremely low net positions, historically low in Silver. This is a setup that supports rising silver prices., as the short squeeze will take prices higher.
Technically, after many months of consolidation, silver prices have finally seen a breakout and are ready to head higher towards $30 in 2023. This means we might see a 25% upside from current levels of $24 and silver outperforming gold. Domestically, with the same upside potential, prices can touch the levels of Rs 80000 and Rs 83000/kg.
Having said that, there would be two headwinds for silver prices, which can lead not so good performance in 2023. Silver prices could edge lower if the US economy avoids a recession and the Fed doubles down on the tight policy outlook with inflation not declining as desired. Additionally, a reinstatement of coronavirus restrictions in China could force market participants to reassess the demand outlook and make it difficult for bullion prices to gain traction.
The best way to stay invested in Silver is by buying Augmont Digital Digital Silver in lumpsum amount or SIP every month. Digital Silver is genuine, 24K fineness, 100% insured, safe and secure. It can be bought or withdrawn online 24 hours a day, 7 days a week, and 365 days a year. You can take physical delivery of the metal to your doorstep in form of physical jewellery or coins or cash at the time of redemption.