May 2020

Silver price has lagged gold that of gold this year. The price of silver has declined by more than 16% while that of gold has soared by more than 12%. Silver price vs gold price YTD Silver is an industrial metal The main reason why gold price has outperformed that of silver is that gold is merely a store of value or an investment. Most gold that is mined today is bought by investment firms and central banks. On the other hand, while some silver is bought by investment funds and banks, a significant amount is bought by industries. A good way to see this is to consider the biggest silver and gold ETFs. The biggest silver ETF, iShares Silver Trust, has more than $6.2 billion in assets. This is far much lower than the SPDR Gold Trust that has more than $57 billion in assets. The biggest reason why silver price has lagged is that it is an industrial metal. The metal is used mostly in the manufacture of jewellery, tableware, and in medicine. The challenge is that industrial production in most countries is at historic lows. In the United States, the production declined to the lowest level since 1946 and manufacturing activity in most countries is at record lows. The demand side has also been affected. Retail sales in most countries has dropped, which is a bad thing for silver prices. On a positive side, there have been increased inflows in silver ETFs. This has provided some support to silver prices. Silver prices react to 5G delays A common fact that is never discussed is silver’s role in 5G network. This is partly because many people still don’t know that silver will be used in large quantities during this phase. In a report released earlier this year, The Silver Institute said that silver demand would rise as 5G continued to be implemented. The report said: “Despite weaker global car sales, silver demand should benefit from vehicles’ rising sophistication and electrification. Silver use in 5G-infrastructure and upcoming intelligent electronics is also likely to fuel demand gains.” In another report, the institute highlighted how silver will be used in this implementation. The report said that silver will be used in the automotive electronics market, semiconductors, consumer electronics, printed electronics, and OLED among others. These are sectors that are expected to grow as 5G takes shape. The chart below shows the various ways that silver will be used in the 5G environment. As such, the biggest challenge is that most 5G projects are being delayed. Many companies that are directly involved in 5G have said that the rollout will be delayed because of the outbreak. These companies include: Huawei, Ericsson, and Nokia. Therefore, there is a likelihood that this has played a role in the weakening situation in silver market. How silver will be used in 5G Download our Q2 Market Global Market Outlook Silver price technical forecast On the four-hour chart, we see that the silver price has been moving in a sideways direction in the past two weeks. The price has remained solidly above the 23.6% Fibonacci retracement level. It has also remained slightly below the 50-day EMA. I expect the price to remain under pressure but I will be watching out for the 14.50 support and the 15.45 resistance level. A move below the support and above the resistance will likely be the start of a new trend.