Brightest Silver Lining To A Gloomy 2020 – Bullish Breakout In Silver Prices

  • Commodities Analysis

Silver prices have certainly had a wild ride this year, more than living up to its super-speculative reputation. Silver got sucked into the overwhelming maelstrom of fear from mid-March’s stock panic on governments’ COVID-19 lockdowns, plummeting 35.8% in under a month! The resulting $11.96 nadir was brutal, well below the world’s silver miners’ all-in sustaining costs of production. Silver had been left for dead at that 10.9-year low.

But like a phoenix rising from the ashes, the rebound in silver prices out of those extreme lows was incredibly violent. Over the next 4.8 months into early August, silver prices skyrocketed 142.8% higher to $29.04! That proved its best level in 7.4 years. If such high silver prices can be sustained, that would be a game-changer for the long-struggling major silver miners. And so far these way-better silver prices have largely held since.

The huge positions that sure looked speculative initially have largely stayed deployed since even riding out a silver correction. That implies these holdings are now being viewed as long-term investments. The silver investors’ resoluteness is very bullish for this metal, keeping silver high which fuels growing interest.

With this crazy year winding to a close, SLV’s holdings alone have skyrocketed 194.8m ounces year-to-date! Among all kinds of excellent data in the World Silver Survey reports is the silver-bullion totals held in physically-backed ETFs around the world. At the end of last year, SLV’s holdings commanded 49.8% of the world total! So this American silver ETF dominates its space, and silver ETFs are increasingly silver’s main driver. In a year full of remarkable and unprecedented market action, what happened in SLV’s holdings is near the top of the most-amazing list.

The highly-speculative momentum-chasing SLV positions that mushroomed last summer have morphed into apparent long-term investments! That doesn’t necessarily mean the same stock traders kept their capital deployed in silver. The hot-money millennials could’ve fled, while institutional investors started to amass silver portfolio allocations after its huge upleg finally put silver back on their radars for the first time in years.

Any capital migrating into silver has about 12x the potential to drive silver-price upside than the same amount flowing into gold . And using SLV’s holdings as a proxy for overall silver investment, silver has won massive capital inflows this year. At the end of 2019, SLV’s holdings were worth about $6.5b. This week with both much-higher silver prices and SLV holdings, they are worth $14.0b which has soared 116.9%! Silver prices rebounding after correcting parallel to gold’s own rebalancing selloff, and the persistent high SLV holdings, argue that a new silver upleg is likely getting underway.

The bottom line is silver investors have proven remarkably resolute since this metal’s parabolic peak in early August. The dominant SLV silver ETF’s bullion holdings, which are the best daily proxy for global silver investment demand, have held near highs in recent months. That was despite a silver correction following an unprecedented vertical soaring in SLV’s holdings, driven by record capital inflows from stock traders.

The fact silver investors haven’t unwound the great majority of their huge summer buying implies they still expect this silver bull to keep running higher. That makes sense with silver being a tiny global market in a vast deluge of new central-bank liquidity. With lots more capital competing for roughly the same amounts of aboveground silver, great upside potential remains. The better silver miners’ stocks will amplify silver’s gains. – Adam Hamilton

Silver – The Most Promising Investment For 2021

Dollar weakness has energized gold and silver markets.

Gold is up 2.4% for the week to bring spot prices to $1,891 an ounce.

Silver, meanwhile, appears to be launching toward a major technical breakout. The white metal gained two dollars through Thursday’s close to clear $26 per ounce. More importantly, it cleared through a zone of resistance to hit a 12-week high.

A strong weekly close that confirms the breakout could lead to a big year-end rally and perhaps set the table for a record run in 2021.

Millions are struggling like never before just to get by as they wait for a stimulus check or some kind of Christmas miracle to arrive. Much of the country is suffering through nothing short of a great depression.

Yet on Wall Street, it’s boom times. Never before have we seen so extreme divergence between the real economy and the exchange-traded economy.

The stock market boom is being artificially fueled by Fed policies. For now, nobody seems concerned about any negative side effects of all the stimulus. The only concern being voiced about stimulus in the mainstream media is that Congress hasn’t done enough to get more of it out into the hands of ordinary Americans.

What ordinary Americans may be facing after the virus recedes and the lockdowns lift is rising costs of living. In fact, that is one of the explicit goals of the Fed’s money-printing campaign.

Jerome Powell and company have declared that inflation has been running too low in recent years. They want to push it higher. They even welcome overshoots of their stated inflation objective.

Yet stocks and bonds are priced as if price inflation will never gain traction. In fact, these asset classes have lately been the primary beneficiaries of an exploding money supply, which has yet to have an obvious impact elsewhere.

The supposed justification for all the stimulus is to help the economy recover.

In the event, the economy does show strong growth next year as the coronavirus fades away, a lot of pent-up demand could trigger a surge in consumer and producer prices. A huge supply of emergency rescue dollars could suddenly start chasing a more limited pool of raw materials and finished products.

Stimulus-fueled gains in financial markets could turn into pains for investors who expect to continue riding the Fed’s expansionist wave through conventional paper assets. The Fed can inject liquidity wherever it wants initially, but it cannot control where it's newly created trillions of dollars ultimately end up.

An unintended consequence of bailing out everyone from Uncle Sam to junk bond issuers on Wall Street may be to undermine the credibility of U.S. dollars and catalyze an ultra-bullish phase in gold and silver markets.

Gold and silver bulls will be looking for a transition in investor psychology to take place – one from paper assets being the preferred investment vehicles to an environment where hard assets are in favour. Obviously, that hasn’t happened yet.

It needn’t be the case that the bond market or stock market crash before metals markets can shine. Outperformance and positive divergence can take place over time regardless of whether stocks hold up in nominal terms or the Fed keeps bond yields suppressed.

The upshot is that precious metals, especially silver, have a great deal of room to run on the upside before being close as to historically expensive as the stock market is right now. – Mike Gleason

Silver prices to shine brightest in 2021

Kitco News – The silver market is garnering a lot of attention heading into 2021 and according to Main Street retail investors, it is the precious metal they will be keeping an eye on in the new year.

Investors have been waiting a long time for silver to finally live up to its reputation and outperform gold. For the fifth consecutive year, retail investors see the grey metal as the top asset in the precious metals sector.

The bullish outlook for silver comes as the precious metal has seen a historic rally since falling to $12 an ounce due to financial market turmoil due to the COVID-19 pandemic. Since its lows, silver prices have rallied more 115%.

In comparison, gold prices are up 25% from its March lows around $1,500 an ounce.

Many analysts also see silver outperforming gold prices in 2021. Low-interest rates, a weaker U.S. dollar and rising inflation pressures will drive both gold and silver, which are both seen as monetary metals. However, improving economic activity next year will add another pillar of support for silver.

Some analysts see the potential for silver prices to retest their all-time highs above $50 an ounce. However, most forecasts call for a more temperate rally with many seeing prices push above $30 an ounce.
Among financial institutions, Canadian Bank CIBC could be the most bullish on silver as they see prices averaging next year around $32 an ounce.

“Even though the commodity has already performed well year-to-date, this metal has the potential to provide investors with even more torque given the relatively smaller market for silver versus gold,” said Anita Soni, author of CIBC’s precious metals outlook.

Silver may take the Gold: Bloomberg Intelligence is looking at $50 silver price

Silver’s bull market is just beginning, said Bloomberg Intelligence, which sees silver as the “primary metal” benefitting from electrification and quantitative easing next year.

The precious metal will follow in gold’s footsteps towards its own record high, said Bloomberg Intelligence senior commodity strategist Mike McGlone.

“Silver may be a primary metal at the forefront of favourable trends in electrification and quantitative easing, with technicals pointing to a nascent bull market, in our view,” McGlone wrote on Monday. “Uniquely precious and increasingly industrial, probabilities lean toward the metal — known as leveraged gold — following its yellow peer to new highs.”

New record highs for the silver market would be a breach of the $50 an ounce level. A move like that would double silver’s current trading levels. At the time of writing, March Comex silver was trading at $25.37, down 3.83% on the day.

Bloomberg Intelligence compares to silver’s price potential to that of 2008, which saw the start of a rally that took the metal to nearly $50.

“Annual technical indicators for silver are akin to those during turns higher at the start of the new millennium and following 2008. We see the metal following a similar trajectory as the aftermath of the financial crisis toward $50 an ounce, but with greater potential for staying power on a path paved by gold,” McGlone said.

This year’s breach of the $20 resistance level was very significant for the metal and will help silver move higher next year.

“There’s a good chance that the 2020 low at about $12 will be as enduring as about $8.50 from 2008, which hasn’t traded since,” McGlone pointed out. “The 2008 launchpad peaked in 2011 with silver matching 1980 high at about $50. Underpinnings are firmer this time, as evidenced by the five-year moving average recently turning upward. A risk-off event like 1Q should find good silver support at around $20.”

This year’s price action was especially volatile amid all the coronavirus disruptions, with silver first falling below $12 and then surging to a seven-year high of nearly $30.

“Our take is bull markets are supposed to get overextended and this one may be just beginning. The market has turned upward following an extended period of subdued prices and may just need some back-and-fill before resuming the rally,” McGlone wrote. “Technicals point to responsive buyers as more likely to prevail on dips than sellers on rallies.” – Anna Golubova

Market watchers are extremely bullish on the outlook for silver for 2021

Both gold and silver are precious metals that typically enjoy a safe haven appeal during times of uncertainty in financial markets. While other asset classes don’t like increased volatility (signalling greater uncertainty around cash flows, dividends, coupon payments, etc.), precious metals tend to benefit from periods of higher volatility as uncertainty increases silver’s safe-haven appeal. The latest bout of concern around the surging coronavirus numbers in the United States and the revelations about the mutated strain in the UK have fostered more uncertainty into year-end.

Silver continues to prove its use beyond just a currency or a safe haven investment, with new applications expected to see a tripling of demand in the next decade.

The precious metal is slowly becoming better known for its antiviral properties and its usefulness in monitoring a person’s vital signs, as well as its importance in solar panels due to it having the highest electrical and thermal conductivity of all metals.

But predictions for silver’s rise in value also lies in the increasing demand in the next generation 5G technology.

According to the Washington-headquartered non-profit industry body The Silver Institute, the electronic components that enable 5G technology will rely strongly on the silver to make the global 5G platform perform seamlessly.

Right now, 5G-related silver demand only amounts to about 7.5 million oz given the industry is in its infancy.

But The Silver Institute estimates that with the ramp-up in the rollout of 5G in the coming years, the amount of silver required will climb to around 16 million oz by 2025 and 23 million oz by 2030. That’s more than 3x the current demand.

In its September Global Commodities Quarterly, Citi said it could see $US40 ($52.77) an oz within six to 12 months with upside cases of US$50/oz and even US$100/oz based on technical analysis.

Everything said and done – with the more-than-convincing breakout in silver prices seen this year, SILVER is the most promising investment for the near future – No doubts about that.

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