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Silver ETFs Likely to Record Huge Upside in 2023

Silver has underperformed greatly in 2021 and lost moderately in 2022. However, Silver could hit a nine-year high of $30 per ounce this year and become a better performer than gold, analysts told CNBC. The last time spot silver hit $30 levels per ounce was in February 2013, according to closing price data from Refinitiv, per CNBC. Cheaper valuation of the metal will also likely to fuel the rally.

Below we highlight a few reasons that can drive silver up in 2023.

Inflationary Pressure

Silver has historically offered gains close to 20% per annum in years of high inflation, said Janie Simpson, CEO at ABC Bullion, quoted on that CNBC article. The article went on to explain that spot silver prices touched a record high of $49.45 in 1980 against the backdrop of a 13.5% inflation rate, up from around $4 in 1976, when the rate of inflation was 5.7%. The precious metal last traded $24.02 per ounce amid a 6.5% inflationary environment.

Silver Supply Crunch

“Silver is in a shortage… and there is a notable drawdown in the available physical stocks held in New York and London’s physical hubs, more so than seen in gold,” said Nicky Shiels, head of metals strategy at precious metals company MKS PAMP, quoted on CNBC. Shiels expects silver to record deficits of more than 100 million ounces over the next five years. According to trade group The Silver Institute, the supply of silver from mine output in 2022 was 843.2 million ounces, which fell shy of the decade’s peak of 900 million ounces in 2016.

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.

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.

ETFs in Focus

Apart from the largest ETF iShares Silver Trust 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 likely gains in silver.

Any Wall of Worry?

Recessionary fears are rife. Hence, we may see softer industrial demand which may act as a headwind for the metal silver. Plus, if the Fed continues to hike rates further, investors might not see non-yielding bullion as a great bet as yet. Plus, if the greenback still holds strong for 2023, this could be troublesome of commodities that are priced in the U.S. dollar in the global markets.

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iShares Silver Trust (SLV): ETF Research Reports

ProShares Ultra Silver (AGQ): ETF Research Reports

abrdn Physical Silver Shares ETF (SIVR): ETF Research Reports

Invesco DB Silver ETF (DBS): ETF Research Reports

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Zacks Investment Research