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Silver has fared better than some of its metal peers against the
backdrop of a disease-threatened global economy, in part because of its
dual role as both a precious and industrial metal.
“The monetary value of silver underpins the vast majority of its
price, and if the metal had only industrial demand working for it, the
price would be under $5 an ounce,†says Gold Newsletter editor Brien
Lundin. “Silver’s precious side means it will outperform industrial
metals in the months ahead.â€
Futures prices for silver, which settled at $17.497 an ounce on Feb.
12, have fallen by more than 2% this year. Silver hasn’t done as well as
gold, which has seen futures prices rise by roughly 3% over the same
period.
Gold has “risen on the back of monetary concerns, but that trend has
been obscured by two geopolitical events,†Lundin says: the U.S.
“dustup†with Iran following the U.S. airstrike that killed Iranian General Qassem Soleimani, and the coronavirus outbreak. Gold rallied on these geopolitical concerns,
then fell as fears subsided. “Unfortunately for silver, that rising
trend has not been clear enough to prompt speculators to bet on silver
along with gold,†he says.
Still, silver has been spared the steeper declines experienced by other industrial metals, such as copper, which has fallen 7% this year.
China is the world’s second-largest consumer of silver after the
U.S., and “the enhanced uncertainty in China surrounding the coronavirus
fears is taking a toll on silver prices,†says Matthew Miller, an
equity analyst at CFRA Research.
“While weaker industrial demand is likely to remain a headwind, CFRA
predicts continued appreciation in safe havens in 2020, and we see a
high probability that silver will outperform gold,†he adds.
This year, the market is likely to see continued growth in physical
silver investment and in the commodity’s use as an industrial metal,
according to The Silver Institute’s recently released views on the 2020
global silver market. “There will be times when silver will have to
contend with issues, such as the current health crisis in China, which
could hit that country’s economy hard,†the institute says.
However, silver’s use as an industrial metal accounted for just over
half of total global demand in 2019, and growth in the metal’s
“industrial offtake†is expected to resume this year, following two
years of marginal losses, the institute says. It sees a 3% rise in
silver industrial demand in 2020, with the electrical and electronics
sector accounting for the bulk of the gains.
Meanwhile, investment in physical silver, in the form of silver
bullion coins and bars, is set to climb for a third consecutive year,
the institute adds.
“The international silver market is poised to experience higher
silver prices in 2020, even coming off the 4% increase in 2019,†says
Michael DiRienzo, executive director of the Silver Institute, which
pegged the 2019 average at $16.21, based on the London Bullion Market
Association silver price. Last year, a marked shift toward looser
monetary policies—as the U.S.-China trade war fed concerns about the global economic outlook—underpinned silver, the institute says.
The institute projects this year’s average silver price at $18.40,
which would mark a 13% rise from 2019 to a six-year high. “We base this
on current global economic health and geopolitical uncertainties
throughout important economies,†DiRienzo says. “Buttressing this
forecast…is a return to silver industrial demand growth, coupled with a
robust increase of 7% in silver physical investment.â€
SOURCE: https://www.barrons.com/articles/why-silver-prices-are-poised-to-rise-even-more-this-year-51581678001
