Gold has been getting most of the shine during the height of the pandemic sell-offs in late March, but as the global economy begins to reopen and ease lockdown restrictions, it’s been silver investors who’ve been out in full force. That trend could likely continue, according to Metals Focus per a Kitco News article.
Metals Focus predicts that silver prices could hover past $20 an ounce before the end of 2020. Silver-based exchange-traded funds (ETFs) are already seeing record inflows thus far this year.
Silver hit a low of $11.64 per ounce back in March but has since hit $18 in recent times.
“Although the rally has since run out of steam, silver has been holding up above $17 recently, a level still notably higher than that seen over much of 2018-19,” Metals Focus said.
Even as a second wave of COVID-19 outbreaks are happening in China, analysts remain “fairly optimistic outlook,” according to the Kitco report.
“Against this backdrop, we believe investment inflows into silver are likely to continue,” Metals Focus said. “Key to this will be exceptionally low policy rates and unprecedented liquidity injections by central banks, which will ensure a minimal opportunity cost of carrying gold and silver. A slowing global economy should also ultimately encourage a further rotation from stocks and bonds into defensive assets.
“Once gold eventually breaks out to challenge its all-time high, silver should reassert its ability to outperform gold, with the white metal expected to surpass the $20 mark in late-2020 (along with a fall in the gold-silver ratio to the low 90s).”
The trend higher for silver could continue, but Metals Focus warns that economic fundamentals could also change that view.
“After a sharp contraction in March-April, silver industrial demand has shown signs of improvements from May onwards, after many key economies gradually lifted lockdown measures,” Metals Focus said. “However, poor consumer confidence and a sharp rise in unemployment have continued to weigh on demand in many end-user applications such as automobiles and consumer electronics. In the photovoltaic sector, as the pandemic spread to more emerging countries leading to worsening economic conditions, this may put further pressure on the industry, which had already faced project delays. Jewelry and silverware have also suffered losses, as a result of lower visitors to retail stores and the appetite for discretionary spending taking a hit.”
ETF investors looking to get in on the silver action can look to funds like the iShares Silver Trust (SLV) and the Aberdeen Standard Physical Silver Shares ETF (SIVR), two of the largest ETFs backed by holdings of physical silver. For those looking for leverage, they can look to ETFs like the VelocityShares 3x Long Silver ETN Linked to the S&P GSCI Silver Index ER (NasdaqGM: USLV) and the ProShares Ultra Silver (NYSEArca: AGQ).
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