What happened in the silver market in Q2? Our silver price update covers supply, demand and other key factors impacting the metal.
Click here to read the previous silver price update.
After an exciting Q1 where passionate retail investors piled into physical silver and drove the “silver squeeze” narrative, how did the white metal fare in the second quarter?
Following its hot start to the year, silver cooled down in Q2 — it experienced a small rise overall during the three month period, but was unable to break past the US$30 per ounce level.
Read on to learn what factors expert market watchers believe are important for silver right now, and what they think could be coming for its price in 2021.
Silver price update: US$30 ceiling firmly in place
While the first quarter of 2021 brought excitement for the silver price, Q2 was a different story.
After climbing fairly steadily from the beginning of April to mid-May, the white metal peaked for the quarter at just above US$28 on May 18. It then plateaued until halfway through June before falling; silver ultimately closed the three month period around the US$26 mark.
Silver price, August 2020 to August 2021. Chart via Trading Economics.
US$30 is seen as an important level for silver, and the precious metal has been unable to cross it for quite some time — in fact, the last time it was above that point was back in 2013.
Speaking to the Investing News Network (INN), David H. Smith, senior analyst at the Morgan Report, said the US$30 area has proven more difficult to break through than many expected.
For one thing, he said, US$30 is a round number, and these can be hard to surmount. For another, like its sister metal gold, silver has so far failed to react much to numerous elements that would typically boost its price — those include the ever-building amount of US debt and growing concerns about inflation.
But, said Smith, in his opinion silver’s days below US$30 are likely numbered.
“I think that area is getting long in the tooth, and I wouldn’t expect it to hold up too much longer as we head into the fall, and after Labor Day for sure,” he commented.
Silver price update: Precious vs. industrial demand
Silver is often referred to as a dual metal, with both its precious and industrial sides impacting demand. While the white metal’s precious side took center stage in the first three months of the year as the silver squeeze story made waves, discussions around its industrial drivers moved to the fore in Q2.
In April, David Morgan, publisher of the Morgan Report, wrote an open letter to Tesla (NASDAQ:TSLA) leader Elon Musk, suggesting that the company should consider accepting payment in silver and/or gold through the LODE Project, which works to tokenize the metals using blockchain technology.
Watch the full interview with Morgan above.
Silver guru Morgan also pointed out that Musk may want to secure Tesla’s supply of silver given that the company is a commercial user of the metal, but is not part of the Silver Users Association.
“(Musk will) have a big need, and he’s not … in the club that’s already got a direct line — so he’s going to have to go in the open market and get it. And that’s a little different than going into, let’s say a source that you’ve already established for the last 30 years or so where you’ve got first dibs on it.”
Like Morgan, Collin Plume, CEO of Noble Gold Investments, believes investors should keep a close eye on industrial demand — he told INN that given the number of industrial uses for silver that have emerged in the last decade, it’s clear the white metal will be in high demand moving forward.
Watch the full interview with Plume above.
“I think my belief is that there will be shortages by next year — I think it’s going to get much more difficult to get it, which we saw during the pandemic. I think we’re going to start to see that again,” he said.
The latest statistics from the Silver Institute, produced in partnership with Metals Focus, show industrial demand for silver came in at 486.8 million ounces in 2020; that amount is projected to rise 8 percent this year to reach 524 million ounces. Net physical investment demand is expected to come in at 252.8 million ounces in 2021, with exchange-traded product inflows anticipated to hit 150 million ounces.
However, a surplus in the industry is expected this year — total silver demand for 2021 is forecast at 1,033 million ounces, 15 percent higher than last year’s 896.1 million ounces. For its part, silver supply clocked in at 976.2 million ounces last year and is seen reaching 1,056.3 million ounces this year.
Silver price update: Can silver break out in 2021?
Silver is known for its volatility, and this characteristic makes its price movements difficult to predict. Nevertheless, many market participants are optimistic about its prospects as 2021 continues.
As mentioned, the Morgan Report’s Smith thinks silver won’t stay below US$30 much longer. In terms of how high the white metal’s value could stretch this year, he said it’s difficult to say, although many people he respects think it could rise significantly to above the US$50 mark.
Smith also spoke about supply and demand dynamics for silver, sharing interesting observations about supply in particular. About 70 percent of silver is produced as a by-product of other metals, and he suggested that this by-product supply may not be as secure as some market participants believe.
Watch the full interview with Smith above.
Many market watchers are expecting an influx of new copper deposits, which will also produce silver as a by-product, but Smith pointed out copper assets aren’t quick to bring into production. That of course doesn’t bode well for silver supply, but does look promising for the price.
Peter Krauth, editor of Silver Stock Investor, gave a similar opinion in a June conversation.
“For sure US$30 is going to remain a bit of a ceiling and a bit of a pressure point and resistance,” he said. But he added that he’s confident it will come this year, saying, “I think we’ll actually see (silver) well above US$30 later this year, perhaps as high as US$35 or even US$37 towards the end of the year.”
Watch the full interview with Krauth above.
“And given that we’re somewhere around US$27, US$28 right now, I think that that’s a really strong climb from here and that should bode well, very much so, for silver stocks. So the potential is there and it’s quite exciting,” he said. Krauth currently sees potential in mid-tier producers and junior silver companies.
Those who follow silver will be familiar with calls for higher prices, but they’ve become even stronger this year as countries worldwide continue trying to curb the impact of COVID-19 by printing money.
Chris Blasi, president of Neptune Global, summed up the situation for INN in a late June interview, commenting that debt has now been increasing for two decades and continues to grow. Meanwhile, the American economy has become reliant on the Fed printing more money — a “dysfunctional” situation that he doesn’t think it will be able to come back from.
Watch the full interview with Blasi above.
“My point is all this noise you hear — it may be interesting to see what your daily cost of living is going to be, but for gold investors and actually precious metals investors … just stick with the fact that no matter what happens — whether we go into a deflationary collapse … or the Fed takes on this hyperinflationary collapse — it doesn’t matter, the metals are going to prevail,” he said.
Gold tends to get the most attention in these situations, but Blasi sees opportunity in silver as well.
“I’m really in alignment with most analysts in our community that silver does pose some excellent upside potential,” he said. “It will probably outperform gold on a percentage basis when this secular bull run is finished — but you’ve got to wear your seatbelt.”
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.