December 23, 2020 by SchiffGold 0 0
Saxo Bank recently projected silver will soar to $50 an ounce in 2021, powered by loose monetary policy along with the push for “green energy.” Bloomberg Intelligence is now making a similar call, saying silver will be “the primary metal” benefiting from electrification and quantitative easing in 2021.
Gold set a new record earlier this year and briefly traded above $2,000 an ounce. In a recent report, Bloomberg Intelligence senior commodity strategist Mike McGlone predicted silver will follow gold toward a record high of its own.
Silver may be a primary metal at the forefront of favorable trends in electrification and quantitative easing, with technicals pointing to a nascent bull market, in our view. Uniquely precious and increasingly industrial, probabilities lean toward the metal — known as leveraged gold — following its yellow peer to new highs.”
A new record would put the price of silver over $50 an ounce. That would mean the price would double within the next year.
The white metal actually has a double-top of around $50. It first got to that level in 1980 and then again in 2011. In a podcast earlier this year, Peter Schiff said $50 is the real resistance level. Once it breaks through, it will go much higher.
Fifty-dollars looms very large. But there’s an old saying about these double-tops. I think they’re made to be broken, and silver is going to break this double-top. And the fact that it’s been there for so long means that when it does break — look out!”
McGlone said the fundamentals look similar to 2008.
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.”
Silver hit a low of $12 earlier this year as economies locked down in response to coronavirus. McGlone said he thinks that will be an “enduring” bottom.
“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. The 2008 launchpad peaked in 2011 with silver matching the 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.”
Silver has been particularly volatile in 2020. After bottoming at $12, silver soared along with gold to a high of nearly $30 an ounce. McGlone said he thinks bull markets are supposed to get overextended and the silver bulls maybe just getting started.
The market has turned upward following an extended period of subdued prices and may just need some back-and-fill before resuming the rally. Technicals point to responsive buyers as more likely to prevail on dips than sellers on rallies.”
The push toward solar power and other green energy initiatives will support the silver market in the coming years. Solar power generation is expected to nearly double by 2025 according to a report released last summer by the Silver Institute.
Silver possesses the lowest electrical resistance among all metals at standard temperatures. According to the report, “Potential substitute metals cannot match silver in terms of energy output per solar panel.”
Further, due to technical hurdles, non-silver PVs tend to be less reliable and have shorter lifespans, presenting serious issues for their widespread commercial development.”
Even if the global economy recovers more slowly than expected in the wake of the pandemic, green energy demand for silver will likely remain robust. Analysts expect many government stimulus plans will include funding for green initiatives.
More fundamentally, silver is a monetary metal, and the Federal Reserve has no exit strategy for its inflationary policy. Earlier this year, the Federal Reserve moved the goalposts to allow inflation to run hot. As Schiff noted at the time, by injecting so much stimulus into the economy in the past, the central bank has created a situation where it can never actually fight the inflation that it creates.
That’s why the Fed is now saying we’re going to let inflation run hotter – because they have no choice. It’s not because this is good for the economy. It’s not. It is necessary to keep the bubble from deflating.”
The silver market could also face tight supply. Silver mine output was hit hard by the pandemic. Production is projected to fall by 6.3% to about 780.1 million ounces in 2020. The big drop in silver output is largely a function of mine shutdowns due to coronavirus, but mine output was already trending down before the pandemic. Global mine production fell by 1.3% in 2019.
At its core, silver is a monetary metal and it tends to track with gold over time. The silver-gold ratio of 73-to-1 tells us the white metal is still significantly undervalued compared to gold. History tells us silver will eventually close the gap, meaning either gold will drop or silver will rise. Given the economic dynamics and the current extraordinary monetary policy, a continued gold bull run seems more likely and silver will probably come along for the ride boosted by increasing industrial demand.
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