Earlier this week, we provided an update on gold and the outlook for its price. The In Gold We Trust (IGWT) report released in June 2023 also provides an update on the silver price. In this article, we discuss what the report says and what the outlook for the silver price is.
 

Silver performance in different currencies

The image below shows the annual performance of silver in various currencies from 2000 to 2023. When we look at the average performance, we see that the silver price can fluctuate significantly. This is often one reason why an investor might choose silver over gold: the silver market is much more volatile. As a result, investing in silver involves more risk compared to gold but can also yield higher returns in the short term.
 

Silver returns in different currencies from 2000 to 2023
 
Silver is more speculative than gold but is still seen as a safe haven against inflation. In uncertain times, demand for precious metals increases. However, it is not a reliable recession hedge: during the 2008 credit crisis, silver had a negative return, likely because silver is seen as a cyclical industrial metal rather than a monetary metal during a recession. However, when we look at the months before and after the recession (phase 1 and phase 5 in the image below), silver performs above average. Even in the years before and after the recession, silver prices take significant leaps. On average, the return over this period across these currencies was +12.7% per year.
 

Incrementum recession phase model
 

Silver price

According to the IGWT report, the combination of a shrinking silver supply and strong industrial demand forms a solid basis for rising silver prices. The energy transition drives innovation in the solar energy industry, which increases the use of silver in industrial applications.
 
Price trends show that when gold rises, silver tends to follow, meaning that gold prices will be crucial for the fate of silver in 2023. The IGWT analysis indicates that silver can benefit from deflationary dynamics that occur at the end of a recession.
 

Average performance – Incrementum recession phase model
 
When we look at the average returns of different investments within the Incrementum recession phase model from the IGWT report, we see that gold performs well during a recession, while silver performs well during the recovery phase at the end.
 

Investing in silver

Investors with limited capital often choose silver. Silver is seen by investors as an attractive investment, given its potential for high returns. Additionally, silver has a relatively low price, making it easy to buy. At the time of writing, the price of a pure gold coin of 1 troy ounce (31.103 grams) is approximately EUR 1,800, while that of a pure silver 1 troy ounce (31.103 grams) coin is around EUR 30.
 
Buying silver coins is the most popular way to invest in physical silver. The major advantage of these coins is that they are traded under the margin scheme, making them much cheaper.
 
Disclaimer: The Silver Mountain does not provide investment advice, and this article should not be considered as such. Past performance does not guarantee future results.