Silver price to push above $30 an ounce in 2021 despite short-term turbulence - Metals Focus
(Kitco News) - Caught in a consolidation pattern, the silver market could remain under pressure in the near-term, but one research firm says that the precious metals long-term fundamentals remain intact.
In a report published Tuesday, analysts at U.K.-based research firm Metals Focus said that because of resilient demand, gold prices should end the year near its August highs; meanwhile, looking to 2021, the analysts say they see silver prices pushing “well above” $30 an ounce.
The analysts noted that even during silver's nearly two-month consolidation period, investment demand has remained robust.
"The white metal's failure to break through the psychologically important $30 level initially prompted some profit-taking in late August and early September. As we write, however, much of this outflow has already been reversed, leaving global holdings now only a fraction below their August peak. With 2020-to-date inflows standing at some 316Moz, silver ETPs are on track to record their highest ever annual growth,” the analysts said.
Although gold prices have hit all-time highs this year, Metals Focus doesn't see that for silver just yet.
The analysts said that they see a new silver rally coming after the Nov. 3 U.S General Election.
"Almost irrespective of the outcome of the U.S. election, fresh large-scale fiscal and monetary stimuli seems inevitable, given an uncertain economic recovery and still high COVID-19 cases. The same may apply to Europe where record infections and new lockdown measures have also cast doubts about the solidity of the anticipated economic recovery. The case for silver (and gold investment) will therefore remain strong,” the analysts said. "This is the main assumption behind our forecast that the silver price will break through the $30 mark during 2021.”
Although Metals Focus remains a long-term silver bull, they note that investors should expect to see more volatility in the near term as expectations surrounding global economic growth continue to shift.
"A slower than expected economic recovery and still elevated unemployment rates globally will continue to weigh on the recovery in industrial, jewelry and silverware demand,” the analysts said.
At the same time, the U.K.-research firm said that growing mine supply could also be a headwind for prices. They expect that to see a continued supply surplus in silver this year and in 2021.
“Overall, the silver market is therefore expected to remain in a physical surplus. This implicitly means that investors will be called upon to absorb these excessive supplies. This expectation underpins our base case forecast for silver, hence our belief that prices will continue to strengthen over the foreseeable future,” the analysts said.