Many investors are asking themselves, “When will silver go up?” The market conditions are ripe for another run up in the silver price.
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It’s no secret that the silver market can be incredibly volatile. From June 2020 to June 2021 alone, the white metal has seen price levels ranging from about US$17 per ounce to US$29.50.
Many investors are confused by the precious metal’s movement. After all, silver is a safe haven asset that generally fares well in times of turmoil, and the past year has been packed with tense political events — not to mention the coronavirus pandemic and the resulting global economic impact.
Unfortunately, answering the question, “When will silver go up?” is tricky. Even seasoned analysts can’t tell the future, and it’s difficult to find a consensus on the topic of when it will enter a bull market.
Nevertheless, it’s definitely possible to track down different opinions on the topic. Market participants interested in investing in silver would do well to keep these ideas top of mind as they try to determine where the price may move in the future.
When will silver go up?: Silver year-on-year
To approach the question, “When will silver go up?” it’s useful to look at its past performance.
As mentioned, the silver price has had ups and downs over the past year, including shooting up from the US$17 level to over US$28 in the summer of 2020, followed by a drop down to the US$22 mark by late September. In early February 2021, the silver price broke to a high of US$29.50 per ounce; however, by the end of March the metal had slid back down to around US$24.
It’s helpful to look at gold price drivers when trying to understand silver’s price action. Silver is of course the more changeable of the two precious metals, but it often trades in relative tandem with gold bullion.
In fact, silver’s big ride from US$17 to over US$28 in the summer of 2020 coincided with gold reaching its highest price in history — US$2,067.15 per ounce on August 7, 2020.
For gold, and by extension, silver, a key price driver lately hasn’t been so much supply and demand, but uncertainty. As noted, the past year has been filled with major geopolitical events, most notably the coronavirus pandemic, but also continued tension between the US and other countries such as China and Iran. Those and other developments have been major sources of concern for investors in the precious metals market.
Precious metals investors have also been closely following the US Federal Reserve’s interest rate plans. Rate hikes are generally negative for physical silver and gold prices — that’s because when rates are higher it is more profitable to invest in products that can accrue interest.
Market participants who are looking to invest in silver and wondering, “When will silver go up?” will want to watch what central banks do. In July 2019, the Fed began cutting interest rates for the first time since 2008, dropping interest rates by a quarter point to a range of 2 to 2.25 percent. Since then, the Fed has slashed interest rates to zero. As of its April 2021 meeting, the Fed had no plans to hike interest rates any time soon, and in fact some economists at the central bank are arguing for sub-zero interest rates.
When will silver go up?: Silver supply and silver demand
With the silver price enjoying some momentum, investors are keen to know what may come next. They continue to ask, “When will silver go up?” and are on the lookout for catalysts that may drive it higher.
Moving forward, geopolitical events, the global socioeconomic impact of the coronavirus and future Fed rate changes will be key factors to watch. As the US and China continue to be embroiled in longstanding trade tensions and gold continues to climb, silver may be in for a stellar second half of 2021.
But what about silver supply or silver demand? Interestingly, the latest World Silver Survey, published by the Silver Institute and Metals Focus, indicates that in 2020 the silver market experienced a 5.9 percent decrease in mine production, contributing to an overall global silver supply decline of 4 percent. No doubt, the slide in production was in large part due to the impact of COVID-19 lockdowns on operations.
In 2021, mine production is expected to increase by 8.2 percent to 848.5 million ounces, while overall global silver supply is expected to also increase by 8 percent to 1.056 billion ounces. The growth in silver mine production is expected to continue over the medium term. In the longer term (four to five years), investment in further silver exploration and development will be needed to sustain mine production.
On the silver demand side, 2020 investor demand for silver bars and coins was up 8 percent year-on-year, attributed to what the World Silver Survey described as “a growing appetite for safe haven assets,” and initially “the strength of the gold price.” Holdings in exchange-traded products experienced another record year of demand, up 298 percent to 331.1 million ounces.
Nevertheless, overall silver demand was down by 10 percent in 2020, mainly due to the economic impact of COVID-19. While industrial demand suffered a disappointing 5 percent drop, the steepest falls in demand came from photography (16 percent), jewelry (26 percent) and silverware (48 percent). The one shining light was the 2 percent increase in demand from the photovoltaic industry.
For 2021, further growth in physical silver investment is expected, such as silver bullion coins and silver bars. This silver market segment should rise for a fourth year, jumping 26 percent to 252.8 million ounces — that would be the highest level since 2015. The year should also bring a recovery in industrial demand (forecast at 8 percent), and photography (4 percent), while the jewelry and silverware segments are expected to make a roaring comeback at 24 percent and 32 percent, respectively.
When will silver go up?: Silver in the future
While the silver price outlook is impacted by supply and demand, it is also heavily influenced by investors who buy precious metals as safe haven assets during times of economic or political uncertainty. The World Silver Survey predicts the silver price will hit US$32 by the end of 2021.
CPM Group managing partner Jeffrey Christian says his firm “wouldn’t be surprised to see the price go back up and test US$30 or US$32 over the next several months.”
But will silver surpass its record high of nearly US$50 per ounce? Christian thinks the market fundamentals are supportive for silver to climb back to that historical level. “At some point, we think the price of silver will rise and rise sharp,” he said. “That increase we expect to coincide with the next financial and economic crisis.”
Of course, there’s also the question of manipulation — experts such as Ed Steer of Gold and Silver Digest and GATA believe that the silver price is controlled by entities like JPMorgan (NYSE:JPM) and will not rise significantly until these players allow it to do so.
However, these factors don’t mean that the silver price will never again reach its highest price of nearly US$50. In fact, Chris Marcus, founder of Arcadia Economics, who is the author of the book “The Big Silver Short,” has described the white metal as “an amplified version of gold,” and said he’s surprised to see the white metal trading where it is.
Watch the full interview with Marcus and Brien Lundin above.
“I look at what happened in 2011, that’s what the book gets into,” said Marcus in an interview with the Investing News Network. “Either the price came down because they sold a lot of paper that they can’t back up, or maybe there’s another explanation. But if that is correct, to me US$50 seems like a floor whenever a free market comes back.”
If the metal continues rise this year, reaching its highest level will become more plausible.
For investors, a key point to remember is that the resource space operates cyclically — while a commodity like silver can experience price rises and falls, ultimately what goes up must come down, and vice versa. The advice to “buy low and sell high” is repeated often for a reason, and though it’s nigh impossible to predict market bottoms, at today’s price, now may certainly be a good time to flex your purchasing power and buy silver.
This is an updated version of an article first published by the Investing News Network in 2015.
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Securities Disclosure: I, Melissa Pistilli, 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.