Global silver demand is largely driven by demand from various industries. Due to the impact of the coronavirus on the global economy, demand from these sectors has declined recently. As a result, the silver price has barely increased in recent months. Analysts at Bank of America predict that this may soon change, as it seems the industrial sector could recover more quickly than other sectors from the economic damage caused by the coronavirus.
 
Bank of America has raised its recent silver price forecast from $16.60 to $16.87 per ounce. However, the silver price forecast for 2021 is much higher, at $23 per ounce. The bank's analysts see demand for silver from the industrial sector as the main driver of this rising price. In the short term, silver may still be affected by declining demand from the industrial sector due to poor economic prospects. However, the industrial sector could recover faster than other sectors in the economy, which could cause silver demand to pick up quickly. One sector that could play an important role in silver demand is sustainable energy production. Another sector that uses silver in its production process is 5G technology. Silver use in this sector is expected to rise to 500 tons in 2025 and increase further to 715 tons by 2030.
 
However, demand for silver does not come only from these sectors. Bank of America analysts also note that demand for silver is increasing among investors. This group is looking at silver with growing interest due to the recent monetary policies of many countries that could promote inflation.
 
Analysts at GoldSilver even predict that silver will attract attention from a third group: governments. Currently, no central bank in the world holds silver as a reserve, and silver is not part of any monetary system globally. Nevertheless, Mike Maloney and Jeff Clark believe that silver could become part of central bank reserves.
 
One argument they put forward is that silver has been used as money throughout history, even more frequently than gold. In the past, silver has also been held as a reserve by various governments. Holding silver as a reserve would be a good option for silver-producing countries such as Mexico, Peru, Russia, China, and Poland.
 
Holding silver as a reserve is becoming increasingly attractive now that many countries are putting more money into circulation. Governments will need to look for ways to protect their currencies. Building silver reserves in central banks could be a good way to do this. Silver has the same qualities as gold since it has no counterparty risk and is recognized internationally as a valuable precious metal. Due to global demand for silver, the metal is also highly liquid. Additionally, silver is currently cheaper compared to gold.
 
While it cannot be said with certainty whether governments will want to purchase silver stocks, the effect on the silver market could be significant. It would not only result in a higher silver price but also increase silver's importance.
 
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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.