Economists who participated in Bankrate's second-quarter economic indicators survey put the odds of a recession in the next 12 to 18 months at 52%, due to the Federal Reserve's more aggressive stance. Another Reuters survey revealed a 40% chance of a recession during the next year and 50% in two years. If macroeconomic conditions ease in the medium term and price support for these derivative metals decreases, the silver mining supply is also vulnerable. Because there is so little silver available, stocks of silver on the ground are closely monitored for signs of exhaustion.
Silver is vulnerable to supply interruptions, more so than gold, because there are relatively few pure silver mines. On the demand side, all segments of silver demand are rebounding, led by industrial, jewelry and physical investment. The high conductivity and ductility of silver make electric vehicles more efficient by establishing lightweight but strong electrical connections between batteries and other car components. While the silver price forecast is affected by supply and demand, it is also heavily influenced by investors who buy precious metals as safe haven assets during times of economic or political uncertainty.
There has been a lack of funding for the development of silver mines and the time frames from discovery to production have been lengthened. The Instituto de la Plata's long-term demand forecast is quite positive, as successive record highs are projected, driven by the potential of silver for green energy applications and new emerging uses. A press release from the Silver Institute describes them as “pillars of a variety of electronic products, including sensors that measure everything from temperature, pressure and movement to humidity, relative humidity and carbon monoxide.” Rising interest rates have created an obstacle for precious metal assets, in particular gold and silver. In addition to the use of silver in solar cells, industrial manufacturing and the automotive industry, future demand is also likely to come from the field of nanotechnology, thanks to the unique properties of silver, such as its high conductivity, resistance to oxidation and its antimicrobial nature.
Jeffrey Christian, managing partner of the CPM Group, believes that while the prices of gold and silver may be suffering a short-term hit, investors with a longer-term market view may view this fall in prices as an opportunity. If costs are expected to rise and silver miners are not confident enough in rising silver prices, it's hard to imagine a scenario in which mining activity is likely to increase substantially. Thanks to ETPs, the institute expects investment in Indian silver to increase, adding to India's successful silver bullion market, in which around 500 moz, or 16,000 tons, have been purchased over the past 10 years. India is currently the third largest physical silver investment market in the world after the United States and Germany.
According to the institute, the use of silver by industry, for jewelry and silverware and for ingots and coins for retail investors, was forecast to reach record levels.