Original title: silver price soared nearly 50% in 2020, can the rise continue in 2021? The agency says the market is still on the verge of reaching a new high.
The year 2020 just passed.
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First fell and then rose. At the beginning of the COVID-19 epidemic, silver prices fell sharply along with gold prices and the US stock market, once falling to a 10-year low of 11.64 US dollars / oz, but then staged a dramatic counterattack, rising to near the 30-and-a-half-year high of 29.86 US dollars / oz to close at 26.40 US dollars / oz, with an annual increase of about 48 per cent, the biggest annual increase in nearly a decade and the biggest increase in 2020. The gains in commodities are also higher.
Silver failed to follow gold to a record high in 2020 because the previous wave of silver prices rose to close to $50 in 2011. However, at present, it is widely expected that global monetary policy will continue to be loose and that measures taken by countries to release fiscal water at the same time will continue to be conducive to the rise in global commodities, while the prospect of global economic recovery will also be good for industrial demand for silver. Silver is expected to be stronger than gold in 2021 and is expected to rise to a record high of 50.
The epidemic situation leads to uncertainty, and the rapid development of industrial scene will boost the demand for precious metals.
Like many other industries, the mining industry faces unprecedented operational challenges in 2020 due to the interference of the COVID-19 epidemic. In the first half of 2020, many precious metal mineral facilities around the world were forced to reduce or stop production. By the third quarter, mine production from major producers began to pick up. But overall, production by the world's top 20 gold miners is still expected to fall by 5 per cent in 2020. Although the mining industry has issued optimistic guidelines for 2021, it remains to be seen whether it will fully return to pre-epidemic standards.
Although mine supply is likely to increase compared with 2020, consumer demand for refined precious metal products such as jewelry will also increase. As usual, investment demand for precious metals will become a variable and may affect the market to some extent. A related uncertain factor is the COVID-19 epidemic. Epidemiologists hope that the effect of mass vaccination is close to that of mass immunity. But the virus is still unpredictable and may mutate into a variety of new strains.
Viral risks, political risks and the inflationary risks posed by the Federal Reserve's unlimited printing of money are all potential catalysts for safe-haven investments to buy precious metals.
A major trend that will accelerate in the coming months will be a shift away from fossil fuels to electrification. At the same time, the demand for industrial metals as well as silver, platinum and palladium is increasing.
Solar and battery technology is experiencing explosive growth, followed by demand for more copper, nickel, silver and strategic metals. In fact, solar panels are one of the fastest growing sources of demand for silver.
The "Green New deal" plan of incoming US President Joe Biden, coupled with ongoing fiscal and monetary stimulus to the economy, could have the unintended consequences of stimulating metal markets.
Demand may grow much faster than supply. Some analysts expect the supply gap between silver and platinum to widen in 2021. This is expected to provide auspicious momentum for silver prices in 2021.
It is worth mentioning that the analysis points out that the world's easily mined high-grade silver deposits are drying up. Although there are still some high-grade silver mines, the primary mining industry continues to deplete its higher-quality reserves. One day, the output of the world's seven largest silver mines will not be able to offset the decline in iron ore grade. This means that the supply side of silver is expected to provide support for silver prices in the medium and long term.
Green energy drives demand, silver bull market is beginning to dawn
Earlier in December, Saxo Bank released its much-anticipated annual forecast. Silver is among the best in commodity markets. The bank's forecast that silver will rise to an all-time high of about $50 in 2021 has attracted a lot of attention.
Saxo Bank brought attention to silver, which continues to outperform gold in 2021.
Ole Hansen, head of commodities strategy at the Bank of Denmark, said silver had a bright future as a monetary metal in 2021 amid rising inflationary pressures and low interest rates on the dollar. Industrial demand and the green energy revolution are also important factors affecting the price of silver. The rise in silver prices in 2021 was affected on the one hand by the price of gold and on the other hand by the rapid growth in demand for silver in industrial applications, especially those that drive the green transformation, such as photovoltaic cells used in solar panel production.
In fact, there is likely to be a shortage of silver in 2021, dealing a blow to initiatives such as the full political support for solar investment and the European green deal during the Biden presidency.
Bloomberg Intelligence says the silver bull market has only just begun. The company believes silver will benefit from electrification and quantitative easing in 2021 and become a "major metal".
Mr Hansen added that if investors wanted to know where silver was going, they should focus on base metals such as copper. Industrial metal prices continue to be close to eight-year highs, with bullish sentiment rising amid reduced supply and increased demand.
Mike McGellon, senior commodity strategist at Bloomberg, said silver may become a "major metal" under the favorable trend of electrification and quantitative easing, and the technical side also shows the dawn of the bull market. Silver, known as leveraged gold, will follow gold to a new high with its scarcity and rising demand for industrial applications. Silver investors should expect that silver prices will eventually break through a new high of $50 an ounce.
Unprecedented monetary easing by central banks around the world
The global economic crisis triggered by COVID-19 forced central banks to take drastic measures. In two emergency meetings on March 3 and March 15
The Fed cut its policy rate by 150 basis points to 0. 25%.
. In addition, the Fed said it would buy at least $700 billion in a new, unlimited program of large-scale asset purchases. On April 6th, the US central bank launched three new emergency lending facilities, namely, the wage guarantee Plan liquidity Facility (PPPFL), the General Business loan Program and the Municipal liquidity Facility. In July, the Federal Open Market Committee decided to extend all emergency loan programs for three months until the end of 2020.
The European Central Bank (ECB), which has no room for further rate cuts, also announced on March 12th that it had decided to buy an additional 120 billion euros a month by the end of 2020.It's an asset. A week later, the ECB launched its 750 billion euro pandemic emergency purchase program (PEPP) and expanded it by 600 billion euros to 1.35 trillion euros in June.
Finally, the ECB increased the quota for PEPP by 500 billion euros to 1.85 trillion euros and extended the limit until at least the end of March 2022.
Bank of England
(BoE) cut its key interest rate by 65 basis points to 0.1 per cent at two meetings in March. In addition, the Bank of England has expanded its asset purchase facility three times, increasing the total from 435 billion pounds in February.It rose to 895 billion pounds in November.
Besides,
Governments of various countries have also adopted active fiscal policies to fight the epidemic and relieve hardship.
Among them, the United States launched a cumulative fiscal stimulus package of nearly 3.8 trillion in 2020, Japan launched 308 trillion yen of fiscal stimulus, the European Union launched 750 billion euros ($909 billion) of anti-epidemic assistance fund, and the United Kingdom launched 280 billion pounds of fiscal stimulus.
The fiscal stimulus of unprecedented monetary easing by the world's major central banks triggered an impressive rally in precious metals. Precious metals are generally seen as safe havens and are not affected by inflationary pressures. Gold prices started at $1575 in April and hit an all-time high of $2075 on Aug. 7, rising more than 30 per cent in four months. Silver rose more than 150 per cent from a decade low of $11.64 an ounce to $29.86.
In addition, in order to alleviate the after-effects of the blockade measures, governments have reached unprecedented levels of fiscal spending, pushing up public debt. For some countries, debt levels are now at their highest levels in decades. This also provides safe-haven support for silver prices. The chart below shows that all sectors of the global economy will generate a large amount of debt in 2020, which will be a huge burden.
White line: family. Blue line: non-financial enterprises. Orange Line: the government. Purple line: financial enterprises)
Analysts generally expect central banks around the world to maintain interest rate policies in 2021, and governments are still likely to expand fiscal stimulus, which will help silver prices continue to rise in 2021.
The potential of silver price is close to that of 2008, and the foundation is more solid this time.
Bloomberg Intelligence compared the price potential of silver with that of 2008. Silver rebounded in 2008, rising to nearly $50 at one point in 2011.
The annual technical indicators of silver prices are similar to those when prices rose in early 2000 and after 2008. Silver is expected to follow a similar trajectory to $50 an ounce after the financial crisis, but with the escort of gold, the potential to maintain a strong rally is even greater. Breaking through the $20 resistance level in 2020 is significant for silver and will help silver move higher in 2021.
Commodities strategist McGellon points out that the 2020 low of around $12 is likely to be as persistent as the 2008 low of around $8.50, which has not been broken since then. Silver, which began to rise in 2008, peaked in 2011, reaching its highest level since 1980, at about $50. This time the foundation is stronger, as evidenced by the fact that the moving average has begun to rise in the last five years. Risk aversion events like the quarter should find good silver support at around $20. Silver prices were particularly volatile in 2020 after the COVID-19 outbreak, falling below $12 and then soaring to a seven-year high of nearly $30.
"our view is that the bull market front should be lengthened and this round may be just beginning," Mr McGellon said. After a period of downturn, the market has begun to recover and may only need some compensation to resume the rally. The technical side shows that responsive buyers are more likely to win when they fall than when they go up. "
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Monthly line chart)
The silver market has attracted a lot of attention before 2021, which is the precious metal they will focus on in the new year, according to ordinary retail investors. Investors have long been waiting for silver to eventually live up to its reputation and outperform gold.
For the fifth year in a row, retail investors regard silver as the number one asset in the precious metals industry.
. The chart below shows that more than 1015 people voted for the "most popular precious metals of 2021". More than 50 per cent chose silver (blue column), followed by copper (orange column), followed by gold (yellow column). Platinum and palladium are thought to account for less than 10%.
Many analysts also believe that silver will outperform gold in 2021. Low interest rates, a weaker dollar and rising inflationary pressures will boost the development of gold and silver, both of which are seen as monetary metals. However, improved economic activity in 2021 will provide another support for silver prices.
Some analysts believe silver is likely to re-test its all-time high of more than $50 an ounce. However, most forecasts expect silver prices to rise modestly and are expected to break through $30 an ounce.
Among financial institutions, Canadian Imperial Commercial Bank (CIBC) is probably the most bullish on silver prices, as they expect silver prices to average around $32 an ounce in 2021.
Anita Soni, author of CIBC Precious Metals Outlook, said that although silver has performed well so far in 2020, given the relatively small plate in the silver market, the precious metal is likely to bring more profit space for investors.
The market is generally bullish on gold prices, and silver prices are expected to follow suit.
In most cases,
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According to the trend, it is widely expected that the price of gold will rise above $2000 in 2021, and some institutions even look at $2300 / oz, which also increases the attractiveness of silver and is expected to drive the price of silver higher in 2021. Earlier, Goldman Sachs Group said gold could rise when evidence of inflation emerged, rising to $2300 in 2021. This will drive the silver price to strengthen along with it.
So, for the price of silver
David Morgan said in the Morgan report that the economy will not recover quickly in 2021, which still causes investors to flock to safe havens, with silver as a co-beneficiary in addition to gold. The price target for silver in 2021 is $40 an ounce.
Note: the Morgan report is a report submitted by the U.S. Senate Foreign Relations Committee to the U.S. Senate.
"I don't think we'll see a lot of recovery in 2021," Morgan said. We can, but I don't think we will see this type of risk. I think a lot of people are looking for a safe haven.
Of course, Morgan points out that some industries that need silver will not disappear anytime soon. Regardless of the state of the economy, industrial demand will be equal to or greater than 2020. There are some things about silver that cannot be replaced. "
Morgan said silver had regained its safe haven status, which would cause it to outperform other metals in 2021. In 2020, the fund purchased 300 million ounces of physical silver. This is completely unheard of. For decades, we have never had this kind of investment demand for silver. "
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Spot silver
Weekly chart)
On the whole, if there is no special "black swan" event, whether it is the recovery of industrial demand, the monetary easing of global central banks, and the rise in gold prices driven by risk aversion and inflation, it is expected to provide support for silver prices to continue to rise in 2021, and above $30 an ounce is an easy target to reach, considering that gold prices may hit another record high. Silver also has a chance to break its all-time high and rise above the $50 / oz mark.