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Silver to remain in gold's shadow in 2020 — ABN Amro

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Silver to remain in gold’s shadow in 2020 — ABN Amro

(Kitco News) - The risk-off environment will keep gold and silver prices elevated next year, but the yellow metal will continue to outperform silver, said ABN Amro.

Trade tensions and global growth concerns will keep markets worried well into 2020, which will make for a very supportive precious metals environment throughout the year, stated the latest note by the Dutch bank.

“For 2020, we don’t expect a material improvement in the outlook for global trade and in the global economy. We think most of this will already be reflected in silver prices though,” said ABN Amro senior FX and precious metals strategist Georgette Boele. “With silver prices following gold prices in an environment of weak economic fundamentals, gold prices will likely outperform silver prices.”

Next year will likely see more global monetary policy easing and negative yielding debt, which are two very important triggers for gold and silver prices.

Despite a precious metals bull-run this summer, silver’s 10% gain has been disappointing due to gold’s strong outperformance, added Boele.

“The deterioration on global growth and global trade has dampened silver prices. However, recently there has been a catch-up,” she wrote. “In the near term, we expect silver prices to decline.

However, an interesting development in Asian markets is giving silver bugs some hope.

“Consumers in India wanted to buy silver before the new import tariffs became effective on 1 August. The import tariffs were raised from 10% to 12.5% for both gold and silver. Second, the gold/silver ratio moved to levels last seen in 1992. This ratio has already been high for years but it was at extreme levels in mid-July, when the ratio hit 93, i.e. gold was 93x more expensive than silver. This looks to have been a clear opportunity to load up on silver,” Boele explained.

In 2021, things might finally turn around for silver with the metal getting a chance to outshine gold, according to the Dutch bank.

“From the moment that global trade and global growth start to recover and provided central banks remain accommodative, we think that silver prices will start to outperform gold prices. A weaker US dollar will also support gold and silver prices. This is more likely to happen in 2021, though,” Boele pointed out.

ABN Amro projected for silver to end the year at $15.50 with prices rising to $18.00 only by the end of 2020. For gold, the bank remained firm on the $1,400 level for the end of 2019 with prices surging towards $1,600 only at the end of 2020.

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