Will Silver’s Momentum Accelerate in 2025?

Summary

Silver has performed well in recent years, but despite a 24% rise in 2023, there’s a sense that it should be doing better, especially among retail buyers. While demand has cooled since its pandemic-era surge, significant factors are shaping a potential shift in momentum for 2025. These include Russia and China’s increasing interest in silver reserves, growing retail investor confidence, and an expected rise in industrial demand. If these conditions align, silver could see a major surge, making 2025 a pivotal year. The question now is whether silver will build enough momentum for a new run.

Takeaways

• 😀 Sir Isaac Newton's concept of momentum, described in 1687, has inspired various fields, including financial markets, where momentum trading draws on this principle.
• 😀 Despite silver's strong performance in 2024 (up 24%), there is a sense of disappointment among silver stackers, as many expected higher prices.
• 😀 While silver prices have outpaced the Dow and S&P 500, there is a feeling that it should be doing better, reflecting a gap between expectations and reality.
• 😀 Silver's supply is constrained, with declining mine production, while demand continues to rise, contributing to a market deficit of 1.1 billion troy ounces since 2019.
• 😀 Physical silver demand surged during the pandemic but has declined by 37% from its peak, signaling a shift in momentum, with fewer retail investors participating.
• 😀 A brief silver short squeeze attempt, spurred by retail investors inspired by the GameStop saga, failed to deliver the expected gains, resulting in waning interest from the retail sector.
• 😀 Industrial applications, accounting for 74% to 83% of silver demand, are the primary drivers of silver's market performance, though retail demand remains a key wildcard.
• 😀 Russia's decision to add silver to its central bank reserves could be a transformative development, signaling a shift toward silver as a strategic asset.
• 😀 China has also been quietly accumulating silver as part of its broader geopolitical strategy, potentially boosting silver demand in the future.
• 😀 A survey of silver investors suggests growing confidence, with many expecting silver to surpass $40 an ounce by 2025, potentially signaling a resurgence in retail demand.
• 😀 The year 2025 could mark a pivotal moment for silver, with momentum shifting back toward growth, driven by investor sentiment, central bank activity, and industrial demand.

Q & A

What is the concept of momentum as it relates to silver markets?

Momentum in silver markets, derived from Sir Isaac Newton's laws of motion, refers to the continued movement of silver prices once they start gaining traction. Just like an object in motion, silver tends to keep moving in the same direction until a significant event or tipping point causes a reversal.

Why has silver’s market performance been considered disappointing by some retail investors?

Despite silver's strong performance, including a 24% increase year-to-date and a 44% rise earlier in 2024, many retail investors are disappointed because the price hasn't reached the levels they expected, considering the tight supply and growing industrial demand.

What role does silver play in industrial applications?

Silver is crucial in industrial applications due to its unique properties, such as high reflectivity, conductivity, and antibacterial qualities. It is irreplaceable in industries like electronics, solar panels, and green energy, accounting for 74% to 83% of total silver demand.

What was the silver squeeze attempt, and why did it fail?

The silver squeeze attempt was inspired by the GameStop short squeeze, where retail investors on Reddit sought to drive up silver’s price by buying massive quantities. The attempt failed because silver did not experience the massive gains hoped for, and enthusiasm waned as investors moved on to other opportunities.

How significant is the decline in retail demand for silver from 2022 to 2024?

The decline in retail demand is substantial, with net physical investment dropping by 37% from a peak of 337 million ounces in 2022 to an estimated 212 million ounces by the end of 2024. This marks a significant shift in silver’s momentum, particularly in the retail sector.

What is the silver market’s supply situation?

Silver's supply has been in decline for years, with mine production unable to keep up with rising demand. This supply shortage has contributed to a market deficit of 1.1 billion troy ounces since 2019, which is expected to persist in the coming years.

Why is Russia’s decision to add silver to its reserves important?

Russia's decision to stockpile silver is significant because it marks a shift in how central banks view silver as a strategic asset. If other countries follow suit, it could drive a new wave of demand for silver, similar to the gold-buying trend seen in recent years.

What role does China play in the global silver market?

China has been quietly accumulating silver through an intricate network of miners and refiners, bypassing global exchanges to purchase silver below market prices. Given its alignment with Russia on global financial matters, China is also likely to formalize silver holdings as part of its broader economic and geopolitical goals.

What is the sentiment among retail investors regarding silver’s price in 2025?

A recent survey found that approximately half of retail silver investors believe silver could surpass $40 per ounce by 2025, indicating growing optimism and a potential resurgence in demand if the market conditions align.

What are the main factors that could drive silver’s momentum in 2025?

The main factors include shifting investor sentiment, increasing industrial demand, geopolitical actions by Russia and China, and the potential for central banks to add silver to their reserves. These elements, combined, could ignite silver's momentum, leading to a possible price surge.