With the COVID-19 pandemic playing havoc in world economies and creating a milieu of continuing unprecedented uncertainty, silver will see continued high investment demand stemming from its haven status, offsetting at least to some extent the sharp contraction in industrial demand in March and April.
The institute posits a swathe of investors believe silver is undervalued in absolute terms compared to gold, which, coupled with exceptionally low interest rates that reduce the opportunity cost of carrying gold and silver, and unprecedented liquidity injections by central banks, will continue to push the grey precious metal higher.
Since its mid-March meltdown silver has gained about 50% to $18.69, and has gained 6.3% since the start of 2020.
The institute also expects the gold-silver ratio to drop below 90 by year end, after setting a record at about 127 in March. Market data shows the ratio has already dropped back to about 93.
The ETP growth in the first half 2020 of 196Moz "comfortably surpassed" the highest annual inflow of 149Moz set in 2009, according to the institute. North American listed funds accounted for about 90% of the inflows since March.
Despite most silver mines beingback online after stoppages in major production centres due to the coronavirus, output is expected to fall 7% this year.
Silver industrial demand has shown signs of improvement since May after many key economies gradually lifted lockdown measures. However, weak consumer confidence and a sharp rise in unemployment weighed on demand for automobiles and consumer electronics.
Going forward, some of this consumer drag could be mitigated by flow-through industrial demand from government infrastructure investment programmes.
Metals Focus forecasts an annual decline for global silver jewellery manufacture of just 7% against a projected 25% slump for gold.