4 Reasons Why Silver ETF Rally is Possible in 2022
Silver has underperformed greatly in 2021. But industrial usage and ESG transition, rollout of 5G and cheaper valuation to other metals may help the metal in 2022.
Silver has underperformed greatly in 2021 if we compare the asset with respect to the equity market as well as other metals, both precious and industrial. Silver bullion ETFiShares Silver Trust SLV has lost 18% past year versus 6.5% losses in SPDR Gold Shares GLD and 24.5% gains in SPDR S&P 500 ETF SPY.
In comparison, industrial metals had a sizzling 2021. iPath Series B Bloomberg Copper Subindex Total Return ETN JJC was up about 21% last year and iPath Series B Bloomberg Nickel Subindex Total Return ETN JJN gained 17.7%. iPath Series B Bloomberg Nickel Subindex Total Return ETN JJU added 17.7% and iPath Series B Bloomberg Tin Subindex Total Return ETN JJT advanced about 120% in 2021 (read: Industrial Metal ETFs Win in 2021: What Next in 2022?).
However, several industry experts are betting big on a silver price recovery this year. Analysts told Kitco that gold may stage a rebound this year, while silver may also catch up to gold after lagging the yellow metal for months. Let’s tell you why.
Industrial Usage & ESG Transition
Silver is often considered as an industrial metal too. About 50% of the metal’s total demand comes from industrial applications, while 30% comes from jewelry/silverware/coins and medal manufacturers. The industrial demand for silver is rising, especially on the green energy front. Silver is used in solar power and electric vehicle applications. Hence, growth in the global solar PV industry, a likely rebound in global computer shipments, as well as new sources of demand for sensors used in IoT are providing a boost to silver demand.
Rollout of 5G
The recent emergence and rollout of 5G globally is another positive for silver. The electronic components that enable 5G technology depend on silver greatly. Silver’s role in the electronic applications used in 5G is forecast to rise significantly to approximately 16 Moz by 2025 and as much as 23 Moz by 2030, which would mark a 206% rise from the current level, per a report from the Silver Institute.
Cheaper Valuation Compared to Other Metals
Silver has the best chance to rise in 2022, said Gainesville Coins precious metals expert Everett Millman, as quoted on Kitco.com. "It is so cheap relative to other metals and other commodities. And it figures prominently in emerging technologies and green energy. It is a perfect storm for silver to finally break out in 2022, especially after it really lagged gold these past few years," per Millman.
Supply Deficit in the Cards?
The Silver Institute forecasts a supply deficit for the physical silver market in 2022. A research report from Wisdomtree reveals that capital expenditure in the mining industry has been low due to the pandemic. That should help tighten the supply of silver.
ETFs in Focus
Apart from the largest ETF SLV, investors can also bet on the likes of Aberdeen Standard Physical Silver Shares ETF (SIVR), Invesco DB Silver Fund (DBS) and ProShares Ultra Silver (AGQ) to realize gains in silver.
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SPDR Gold Shares (GLD): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Silver Trust (SLV): ETF Research Reports
iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN): ETF Research Reports
iPath Series B Bloomberg Tin Subindex Total Return ETN (JJT): ETF Research Reports
iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC): ETF Research Reports
iPath Series B Bloomberg Aluminum Subindex Total Return ETN (JJU): ETF Research Reports
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