Jeff Clark, Senior Analyst, GoldSilver.com
What will the silver price do in 2022? And where is it headed over the next 5 years?
I’ve compiled silver price predictions from a number of analysts, both inside and outside the precious metals industry (you can see the current silver price here). I’ll then give you the secret to determining where it’s headed, the three factors to predict its price, and finally my predictions for 2022 and the next five years.
This will be fun, so let’s jump in!
Like most predictions, the ones for silver in 2022 vary. Some are bullish, some are bearish, and some see only slow-moving change.
Silver averaged $25.03 in 2021, and ended the year at $23.08. Here’s where a dozen analysts think the price is headed this year…
You can see the great disparity, the extremes being it will average 23% lower ($17.60), or climb as much as 116% ($50) this year. I’ve seen other predictions that have even higher and lower price targets, showing there really isn’t a consensus about where silver is headed this year.
So who’s right? How does one make a reasonable prediction where silver is headed?
To answer those questions we first have to understand that silver is…
Silver serves two primary functions. It’s a precious metal with a monetary role, and also an industrial metal with numerous and growing applications. Predicting the price, therefore, has to include analyzing both of these functions…
Because of silver’s chemical make-up, it is one of the best electrical and thermal conductors of all the metals. It also has growing use in the medical field, due to its antibacterial properties. In fact, it has so many industrial uses that the Silver Institute calls it “the indispensable metal.”
And industrial demand for silver is going nowhere but up. One big reason is that many “green” technologies require silver. Electric vehicles use almost twice as much silver as internal combustion engines… solar panels contain silver and their installation is growing… 5G/mobile phone technology uses silver. And it’s clear that green infrastructure is a government priority.
The Silver Institute says industrial demand for silver will rise in 2022. They project a…
Much of this demand has not yet hit the silver market, but now that the senate has passed the $1 trillion infrastructure bill, the jump in demand for silver is about to kick in.
And demand is already at record highs… total silver demand in 2021 reached 1.029 billion ounces, the first time it exceeded 1 billion ounces since 2015.
Investment demand for silver fluctuates each year, sometimes wildly. But after industrial use, it is silver’s second-biggest source of demand, ahead of jewelry, silverware, and photography.
So to accurately predict where the price might be headed, one must take into account what level of investment demand is expected. That in itself requires a prediction, but we’ll point out that in 2021 demand for physical silver investment jumped 32% and hit a 6-year high, according to Metals Focus. And silver ETFs rose by 150 million ounces to close at a record high of 1.21 billion ounces.
In other words, demand for silver’s two main functions—industrial and investment—is growing. This means…
Now that we understand this base about silver, let’s look at the…
Lots of things can impact the silver price—the US dollar, economic health, among others—but historically the following three have the biggest influence…
#1: Investment Demand
While demand for all of silver’s uses fluctuates each year, they don’t change dramatically. Greater industrial demand will support the market, but any big spike in the silver price has historically come from one source, where demand fluctuates the most.
This long-term chart shows that as investment demand goes, so goes the silver price.
You’ll notice, however, there is typically a lag effect. Price movements tend to follow changes in investment demand, up or down.
What does this mean for predicting the silver price in 2022?
#2. Gold/Silver Ratio
The gold/silver ratio is simply the price of gold divided by the price of silver. Since both are considered monetary metals, they usually move together—which can give us clues when the ratio gets stretched in one direction or the other.
The higher the ratio the more undervalued silver tends to be relative to gold; the lower the ratio the more overvalued silver is to gold.
And when readings get stretched, they tend to correct themselves, as this chart shows… notice the ratio roughly corresponds to the highs and lows in precious metals cycles.
As 2022 began, the ratio was about 80, and you can see this reading is typically near a cycle low for precious metals prices. Meaning, the ratio is likely to fall and thus the silver price rise.
The ratio is also 28% above its 50-year average. These facts suggest silver is more likely to rise this year than fall.
Leigh Goehring of Goehring & Rozencwajg Associates is emphatic about the long-term price of silver, based on the ratio. “It’s hard to believe that in January 1980, on a very brief basis, the gold-silver ratio was 17:1. I wouldn't be surprised if we see that ratio again at some point in this bull market… if gold gets to $10,000 in this decade and the gold-silver ratio gets down to 20:1, that's $500 silver.”
Mike Maloney, founder of GoldSilver.com, also expects to see the gold/silver ratio drop below 20 again. “The day that people rush back to gold and silver as monetary assets is the day you see the ratio revert back to its 1980 low of 14, giving you enormous leverage to gold.”
#3. Silver TRAILS Gold
One frustration of silver investors is that the price can, at times, be dormant, even when gold is trending higher. But this is actually historically normal.
This chart shows that silver usually trails gold in bull markets. But then it catches up and outruns gold.
You’ll see silver popped higher than gold in the current bull market—but it would be historically abnormal for the bull market to be over, as it would be one of the smallest gains on record.
What this means for 2022 is that if one believes precious metals are in a bull market—and the gold price suggests we have been since 2019—then we should expect silver to catch up to gold in fair time. If not this year, then 2023. Either way it suggests that silver prices are more likely to rise in 2022 than fall.
Some analysts believe this trend corresponds to silver’s delayed reaction to inflation. According to Perth Mint manager Jordan Eliseo, “The inflation driver is likely to kick in only this year, as the market was convinced inflation was transitory until only two months ago. We also saw more money pour into equity strategies this year than pretty much the last 20 years combined—that's held gold and silver back. The U.S. dollar index was up and that is a natural headwind, too. But gold has a history of performing well once the Fed commences a rate hike cycle—and silver follows gold.”
Many analysts have pointed out another fact about this tendency. In bull markets 90% of the move higher happens in the last 10% of time. This highlights both its nature to initially trail gold and also catch up and pass it.
Once the gold price begins its next upleg—which we expect to happen in 2022—then the fuse has also been lit for silver to move higher sooner or later.
Based on the three ways to predict the silver price, here are my predictions for 2022 and the next five years.
The odds favor a higher silver price this year. And over the next few years.
If this prediction is correct, then accumulating silver now would be wise. Here’s a great starter guide on what to buy.
An active investor with a love of writing, Jeff Clark is a globally recognized authority on precious metals. As the son of an award-winning gold panner, with family-owned mining claims in California, Arizona, and Nevada, Jeff has deep roots in the industry. Jeff regularly speaks at precious metals conferences, serves on the board at Strategic Wealth Preservation in Grand Cayman, and provides exclusive analysis and market commentary to GoldSilver customers. Follow Jeff on Twitter @TheGoldAdvisor