The volume of shares in silver exchange-traded funds will increase sharply in 2022

Last week, the volume of shares in the ETFMG Junior Silver Miners silver exchange funds grew by 5.5%, the Global X Silvers Miners - by 4.6% and the iShares Silver Trust - by 1.8%. At the same time, the rate of precious metal fluctuated around $23.5 per ounce.

The prospects for demand for the gray metal look promising in 2022, according to the Silver Institute. The organization predicts global demand for precious metal will grow by 8% and reach a record 1.11 billion ounces. The increased demand for silver will be due to an increase in the growth rate of industrial production this year by 5%. Gray metal is widely used in traditional industries. However, demand for it is rapidly increasing in innovative segments of the economy, which have been developing rapidly recently.

According to the Silver Institute, the record demand for photovoltaic solar panels will bring the aggregate figure for gray metal to an unprecedented level. Photovoltaic technology has emerged recently, but its use is growing rapidly every year. Gray metal is used in photovoltaic panels to generate solar energy. To produce one solar panel, a fairly large amount of silver is needed - about 2/3 ounces (20 g). Since 2000, the amount of precious metal used to produce solar panels has grown by an average of 50% annually. For example, only in 2002-2011 the volume of demand for silver in this segment increased 60 times - from 1 million ounces to 60 million ounces, respectively. In addition, demand for the grey metal is expected to remain robust in the automotive industry and industries linked to the new "5G" communication standard, despite a prolonged shortage of semiconductor chips around the world.

Demand for silver investment bullion and coins could rise 13% in 2022, hitting a 7-year high. In addition, demand for jewelry and silverware should increase by 11% and 21%, respectively.

Global silver production is expected to increase by 7% to 1.092 billion ounces in 2022. Gray metal mining will also increase by 7%. Silver processing will grow at a more modest pace - its volumes will increase by 3%.

At the beginning of 2022, GDP growth rates began to decline in a number of developed countries. In addition, there is an increase in volatility in financial markets. That means there could be a mismatch between current market expectations and cycles of U.S. interest rate hikes in the future. In other words, there is a risk that the price of precious metal will be formed on the basis of assumptions, and not on the actual situation with an increase in the key rate. The rise in silver prices may significantly outstrip the rise in gold prices. The ratio of quotes of two precious metals will fall below 70 by the end of this year.