After suffering from reduced industrial demand, silver prices have risen 9% this week as factories start to resume production.
For the first time this year, China’s factory output has risen, climbing by 3.9% in April after months of shutdown to protect workers from the coronavirus. Unlike gold, which has enjoyed steady gains throughout the crisis as investors flocked to safe haven bullion, the silver market is heavily reliant on industrial demand.
Initially, the Covid-19 lockdown severely hit industrial demand for silver. From an annual high of £15.80 per troy ounce in September 2019 the precious metal slumped dramatically in March to £10.20. After slowly creeping back up the past few weeks, silver has enjoyed a small surge in the past 24 hours, gaining 5%, and reaching £13.57 per ounce this afternoon.
Returning industrial application demand, such as seen in China, plus the easing of lockdown restrictions will likely see the gains in silver continue. This will no doubt be further bolstered by increasing investment demand, as many turn to silver as a cheaper alternative to gold.
In the long-term, growing demand from solar and electric vehicles will be fundamental drivers in the silver sector. This could lead to demand tripling over the next five years believes David Morgan of the Morgan Report. Looking just as far as this year he says, "I see (silver) picking up momentum. I see a high of US$22 (£18.09), which is about a 30 percent gain from where we have been in 2019.”
With supply likely to increase in the coming weeks as well, investment demand can start to be truly realised, after weeks of scarcity restricted the amount of silver available to the market. This could then mark the start of a new rally for silver that could see it push towards its 2011 peak of £29.26 per ounce.