Market Overview

10 December 2020

Silver prices may double in 2021

It may sound weird, but the title of the article can be found on a list of shock scenarios recently published by Saxo bank. There are no substantial calculations behind its forecasts, as the purpose of the list may rather be to point out possible shocks and surprises for the global economy for the year to come. However, this shock tactic may have some reason behind it, as some of these forecasted scenarios may be actual possibilities and developments that may unfold during 2021.

One of the most intriguing scenarios suggested by Saxo Bank is the  rising demand for silver. Leaving aside the weakening U.S. Dollar, massive stimulus measures - both fiscal and monetary - that may push prices on the assets denominated in Dollars, silver is among the most demanded commodities for production. A global  decarbonizing trend, ESG and the rising concern about clean energy may get new recognition after  Joe Biden is sworn in as the new President of the United States in January, as he is prominently known as an advocate for “green” technologies. Similar efforts to develop “green” technologies are also being conducted by China and Europe. 

Silver, by virtue of its technical characteristics and its high conductivity, is actively used in solar panels and the production of electric vehicles. Such productions may gain additional advantages in coming years. Meanwhile, the production and supply of silver is limited and it is difficult for production and subsequently for supply to be significantly increased in order to  meet t rising demand. More than a half of silver production is  a byproduct of other nonferrous metals refining.

The widening gap between the demand and supply for silver, its relevance for production, and its use as a financial instrument, may provoke a possible rally in silver prices over the coming months. Silver prices rose along with gold in 2020, from its lows at $11.7 per ounce in March to the highs of $29.9 in August, meaning that the price rose more than twice  within six months. So, the idea that the price of silver could double in 2021, is not an extraordinary notion that is too far-fetched.. Technical analysis supports above-mentioned fundamental prerequisites. Silver prices dropped this autumn to $24.4 per ounce. Such correction within the upward trend correlates with a possible target price of $49.4 per ounce. Moreover, the all-time highs for silver prices are at $49.8 per ounce, close to the $50 level that, if reached, would mean doubling of silver prices. Therefore, this doubling of silver prices is not something impossible and we may see silver storming this level in 2021. 


Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.


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