Is it time to buy silver? Here are 3 reasons to do so

on May 25, 2023
  • Silver is a good investment as it outperformed major fiat currencies in the last two decades
  • Strong demand for silver from the solar panel industry should support higher prices
  • The medium to long-term technical picture is bullish

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Silver followed on gold’s steps in May and dropped from the 2023 highs as the dollar strengthened. But despite the steep correction, silver might be a good addition to a portfolio for investors with a medium to long-term horizon.

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So here are three reasons to buy silver:

  • Silver outperformed main fiat currencies in the last 22 years
  • The 2050 net zero target implies strong demand for silver in the years ahead
  • The medium to long-term technical picture remains bullish

Silver outperformed main fiat currencies in the last two decades

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Historical performance is one of the best reasons to add silver to a portfolio. That is, besides the fact that it is not correlated with the stock market. As a rule of thumb, the less the correlation, the better the decision to add an asset to a portfolio.

When compared to a basket of currencies made of the US dollar, euro, British pound, Australian dollar, Canadian dollar, Chinese Yen, Japanese yen, Swiss franc, and the Indian rupee, silver has outperformed on average in the last 22 years by: 9.4%, 9%, 10.2%, 7.8%, 8.1%, 8.5%, 10.4%, 6.5%, 11.5%, 9.1%.

So, in the end, it is not about having a preference for precious metals, but it is about adding the right asset to a portfolio.

Strong demand for silver should support higher prices

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The price of silver also depends on industrial demand. Most of it derives from solar photovoltaics, and demand grew 28% YoY in 2022.

Moreover, to meet the net zero emissions goal by 2050, solar PV power generation will need to grow a staggering 25% YoY until 2030.

Silver’s medium to long-term technical picture remains bullish

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Since trading as low as $12, the price of silver bounced strongly. It failed at $30 during the COVID-19 pandemic, but what followed looks like a bullish pattern.

Silver chart by TradingView

More precisely, the consolidation area looks like a bullish flag. Its measured move, seen in orange, points to $44. Conversely, a drop below $16 would invalidate the pattern.

Summing up, the bullish case for silver has not been so appealing in a long time. So is it silver’s time to shine?


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