The volatile economic market of 2023 may not offer reliable predictions for many industries, but those investing in precious metals can expect one thing: high prices. With the new year, many analysts expect exceptional performance rates as inflation continues soaring while the silver supply begins dwindling. Silver may reach a nine-year high price of $30 per ounce, potentially outperforming growth metrics of the most tried-and-trusted precious metal of all time: gold.
According to the London Bullion Market Association, gold price projections show a 3.3% increase, while silver may go up by a whopping 8.8%. The group of 30 analysts submitting these predictions also stated explanations behind these trends.
Nearly half (43%) explained that the increase in precious metal prices this year stems back to the Federal Reserve’s actions, specifically trust in the U.S. dollar and general currency strength. 14% believe inflation is the largest contributing factor, while 11% cited geopolitical factors. It’s easy to see how these factors can all relate to one another.
The estimated price range for gold is quite wide, though this isn’t anything unusual. Analyst predictions ranged between $1,594 and $2,025 per troy ounce, with the average settling right at $1,859. To put these predictions into perspective, 2022’s average price for a troy ounce of gold was $1,800.
While gold may display exciting increases, but nothing out of the norm, silver is a different story. Analyst predictions show a jump from $21.73 to $23.65 in the coming year for one ounce of silver (though the estimates ranged from $17.50 to $27). While a couple of dollars may not seem like much, it’s all in the percentages.
So why is silver showing such promising increases this year? Silver is often the underdog in the precious metals game. During high inflation periods, silver typically performs better than many of its counterparts.
In 1980 with soaring inflation rates of 13.5% increases, silver reached peak performance levels of $49.45 per ounce. As the supply lessens, the demand rises. The silver shortage is happening at exponential rates as more industrial applications surface and the available physical stocks become concerning.
Some expect the world’s resources will lose 100 million ounces of silver in the next five years alone. Industrial applications constitute nearly half of silver’s demand, so as the electronics and automotive industries continue rising, so will the need for silver. Cars, solar panels, electronics, and jewelry are just a few of the industries that have their eyes set on the silver prize.
The issue lies in production. Silver mines simply cannot keep up with demand. Global silver production continues dropping because it cannot quickly respond to industry changes.
Silver production relies heavily on zinc, gold, and copper mines, so these manufacturers cannot just start producing more whenever demand rises. In 2016, silver’s production rates peaked at 900 million ounces, though it’s only dwindled since then. 2022 only saw 843.2 million ounces.
To add insult to injury, silver mines only produce a small portion of the world’s supply. Even if they could respond to demand faster, it would only add a drop to the bucket. The bottom line is that silver will continue rising in demand and decrease in supply, even if mines crank down.
So, what does this mean for investors in 2023? Many analysts can make predictions about prices, though understanding the rhyme and reason behind these figures adds context to the situation. After viewing historical gold and silver performance in similar economic times, the predictions laid out above only make sense.
It’s important to mention that the current inflation rates may increase silver and gold prices, though they also have one critical negative impact: recession fears. As the current economic state only worsens, industrial demand could soften as companies fear what’s to come. Softened demand might equal a dip in the price increase rate, though not in the upcoming year.
The gold and silver market trends of 2023 show great promise for investors hoping to get in while they still can. As prices continue to rise, many recommend purchasing before things get even higher. As the silver supply shortens and demand increases, an investment now could mean huge gains in the future.
As always, investors must consider their current financial landscape before diving into anything new. Speak with your financial advisor and consider your long-term plans before making moves. 2023 is an excellent year to join the precious metals investing game, but be sure to think about trends for future years as well.
