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CPM Group's Savant: silver prices can benefit from both sides of COVID-19 debate

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(Kitco News) - Silver could benefit from optimism about increased industrial demand as economies reopen following the COVID-19 pandemic at the same time the metal also draws investment demand from those worried about a second wave of the virus, said Rohit Savant, director of research with CPM Group.

“It does stand to benefit at this point from both of those expectations,” he said in an interview with Kitco News. “There is still a lot of uncertainty about how things are going to shake out. That’s helping silver at this point.”

In the short term, Savant continued, the metal could undergo a profit-taking correction after prices rose to a three-month high. But the consultancy is bullish on silver in the medium to long term, he said.

Comex July silver last week traded as high as $18.165 an ounce, which was its most muscular level since Feb. 27. The metal was above $18 again early Monday before backing off its highs. Still, as of 10:42 a.m. EDT, July silver was still 2.7 cents higher for the day to $17.72 an ounce during a session in which June gold was down $23.60.

“For silver, we’re seeing a jump up in optimism across markets. You’re seeing that with all of the industrially inclined precious metals,” Savant said.

As economic growth picks up again, there are hopes that industrial demand for silver and platinum group metals improve, he explained.

Meanwhile, investment demand is also showing signs of picking up, Savant said. He called the metal “relatively undervalued” compared to gold.

“You have some concerns about a second wave of infections and how long the economic recovery will take. So you’ve got silver benefiting from both sides,” he said, referring to both positive and negative COVID-19 outcomes.

CPM Group data put total fabrication demand for silver at 926.4 million ounces in 2019. The largest uses were jewelry and silverware demand, 304.3 million ounces; electronics, 230.4 million; and solar panels, 97.4 million.

ETF demand for silver had improved to 825.3 million ounces as of the end of April, compared to 742.7 million at the end of 2019, Savant said. He looks for this to keep rising.

But while CPM Group is ultimately bullish on silver, Savant cautioned that prices could give up some of their recent gains in the near term due to profit-taking. Further, if a second wave of the virus should cause worse economic damage than current base-case scenarios, there could be a sharper retreat.

“That metal is pretty volatile, and prices have run up quite a bit recently,” Savant said. “I think you could see some pullback from the sharp run-up that we’ve seen. But the medium- to longer-trend, we think, is for prices to go up.”

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