Silver prices are predicted to reach a nine-year high of $30 per ounce in 2023, potentially outperforming gold. The last time silver prices touched $30 per ounce was in February 2013, according to Refinitiv's closing price data. Analysts attribute this outlook to insufficient silver supplies and the metal's historical outperformance during high inflation periods.

Janie Simpson, managing director at ABC Bullion, explained that silver has typically delivered gains of close to 20% per annum in years when inflation is high. Considering silver's current affordability compared to gold, Simpson believes it is possible for the metal to approach $30 per ounce this year, though significant resistance is expected.

A shortage of silver and a notable drawdown in physical stocks held in New York and London contribute to the bullish outlook. Nicky Shiels, head of metals strategy at MKS PAMP, stated that silver is expected to post deficits of over 100 million ounces in the next five years, with industrial demand driving the tight supply. Shiels predicts a base case of silver prices climbing to $28, with a bullish case of $30 or more.

Industrial demand, which accounts for almost 50% of total silver demand, is projected to grow more than 15% over the next five years. This increase is primarily driven by the automotive and electronics sectors, as silver is commonly used in the manufacturing of automobiles, solar panels, jewelry, and electronics.

Randy Smallwood, president of Wheaton Precious Metals, noted that silver production has been dropping since peaking five to six years ago. The Silver Institute reported that the supply of silver from mine production in 2022 was 843.2 million ounces, still below the decade's peak of 900 million ounces in 2016. Silver supply, which is mainly produced as a byproduct of lead-zinc, copper, and gold mines, does not typically respond quickly to demand.

Smallwood explained that when silver prices rise, silver mines cannot easily increase production, as they only supply about 25% of the silver. The market often relies on lead-zinc mines to meet higher demand. While Smallwood anticipates silver prices could reach $30 per ounce, he does not expect the price to hold, predicting that prices will remain comfortably above $20 per ounce. Smallwood stated, 'I'm very bullish on gold, but I'm even more bullish on silver.'

In conclusion, the silver market is poised for growth in 2023, driven by industrial demand and supply shortages. As inflation remains a concern, silver's historical performance during high inflation periods supports the bullish outlook for the metal. Investors should keep an eye on silver prices and consider its potential to outperform gold in the coming year.