Silver demand in 2021 will be record high

History of discovery

Silver has been known to people for a long time. Historians first noted its significance around the 4th millennium BC. e. Then the first jewelry appeared from this noble metal, which was used as exchange currency.

Over time, people learned the properties of this material and began to use it to purify water from impurities. Shamans and clairvoyants valued this metal, calling it a protector of the soul. Ritual knives and sacred weapons were made from it. Astrologers called this material moonstone. He was supposed to show the way to lost travelers, drive out evil spirits and darkness along the way.

Sell Silver in Q2

Despite the very positive first half of the 1st quarter of 2019, the metal eventually lost ground and fell in price by 34 cents. A shooting star has formed on the quarterly chart of silver - the forecast for the second quarter is obvious, a further decline in the value of the precious metal.

On the quarterly time period, support was seen in the $15,000 area, but the bears had already managed to overcome it. A little lower we can see support at $14,800 and $13,900 (last year's lows).

There is resistance in the area of $16, 18,600, 25,000, 35,000.

Characteristics and properties

Material properties:

Metal color: silver-white. A black coating may be observed in cracks, chips, and recesses.
The more impurities a material contains, the faster it oxidizes in open air.
Hardness index - up to 3 on the Moss scale.
Density indicator - up to 12.
Melting point - 961°C.
Boiling point - 2162°C.
High ductility and thermal conductivity.

Cutlery and jewelry cannot be made from pure silver because the metal is very soft. Most often, jewelry is made from an alloy of silver (92%) and copper (8%).

This material cannot be called toxic, but if you take drugs with a high content of it and do not follow the dosage, you can harm the body. Various unpleasant symptoms may develop:

conjunctivitis, irritation of mucous membranes;
change of normal skin color to purple;
the appearance of spots on the face.

If you continue to use drugs with a high content of this metal, it will gradually accumulate in the body and combine with other trace elements. This will lead to a rapid deterioration of the general condition.

Jewelry with silver (Photo: Instagram / serebro_blesk_26)

Cornerstone of technological metals

The post-COVID world will be greener and cleaner. Renewables could double their share of the global energy mix from about 12% in 2021 to 22% in 2030. And despite the economic downturn caused by the coronavirus, global investment in renewables topped $500 billion in 2021, an increase 9% more than in 2021.

Given the significant influx, new infrastructure will be needed to create clean technologies such as electric vehicles, solar panels, wind turbines and so on. This means demand for the metals needed to make these new technologies will also increase.

My colleague Dave Forest has been following this sector for many years. He calls them "technological metals." In fact, some of these metals peaked at 110%, 308% and even 677%.

How does silver relate to all of this? After all, many people think of it as an old-fashioned metal that is not used as often in the modern world. But in reality, silver is one of the cornerstones of technology metals.

According to Dave, the tech metals bull market is just getting started.

Many hedge fund managers who focus on technology say the sector is worthy of attention. This means a new influx of investment and, consequently, higher prices. I believe this will be a megatrend for the decade, and it is still in the early stages of an impressive bull market.

And tenacious investors shouldn't ignore silver as a key technology metal.

Metal mining

In nature, the material occurs in the form of nuggets. More often it is found in lead and copper ores. Initially, the process of obtaining this metal consisted of 2 stages:

ore mining;
carrying out oxidative melting.

After this, a material with the least amount of impurities was obtained. Mining process now:

Once silver-rich ore is discovered, one or more deep holes are drilled into the ground. For this, special drills are used.
Explosives are placed in the holes. The charges are activated.
Ore saturated with noble metal ends up on the surface of the earth.

Workers can only collect consumables for further cleaning and remelting.

The resulting silver is marked with different numbers. This is the so-called noble metal sample. The main types include:

Sample 720. This is low grade material. 1 kg of alloy yields 720 g of silver and 280 g of copper.
800 purity: Another low grade material that cannot be used for jewelry as it has a yellow tint.
Sample 830. The same can be said about this type of argentum as about 800.
Sample 870. This metal is often used for counterfeiting jewelry. It is passed off as white gold and sold for much more.

The best samples are 925, 960, 999.

Silver rate forecast for 2021

Silver was expected to be the favorite in the precious metals market in 2018. Instead, great disappointment awaited him.

However, despite its weak performance in the past year, foreign analysts remain optimistic about the white metal in 2021, especially if gold prices rise.

Silver's success will depend on the decline in the gold-silver ratio, which is near a 25-year high of 84.5. The historical average ratio is around 50 points.

Optimism for silver remains despite its price falling more than 13% this year. The precious metal is primarily an industrial metal and has fallen victim to the deteriorating base metals market, particularly copper, which has fallen sharply from a nearly four-year high reached in early June, according to commodity analysts.

As the escalating global trade war between the world's two largest economies has weighed on expectations for global economic growth, leading market players are now forecasting weak demand for industrial metals, including silver, some analysts say.

However, in 2021, silver is expected to shed its dependence on industrial demand and shine as a monetary metal, outpacing its yellow counterpart as the dollar weakens and the Fed pauses interest rate hikes.

“If you're betting on gold next year, you should be betting on a rise in silver prices,” said Bill Baruch, president of .

Natixis is one of the most bullish banks when it comes to its silver outlook for next year. According to the bank’s experts, the rate of this precious metal will rise in 2021 to a maximum of $18, with an average level of $16.

In a recent interview with Kitco News, Bernard Dahda, precious metals analyst at Natixis, argued his belief in the rise of silver in relation to the corresponding movement in gold prices. He noted that silver is 1.3% more volatile than gold, so if gold prices rise, silver will benefit.

“Although silver is used primarily in industry, it is still a precious metal and will eventually see increased investment demand. Demand for safe haven assets will be the main driver for gold and silver in 2021,” he said.

The Dutch bank ABN AMRO sees the promise of silver and is confident that its rate will reach $18 in 2021, with an average level of $16.6 per ounce.

Georgette Boehl, coordinator of the bank's currencies and precious metals strategy department, said low bond yields and a weak dollar should be positive factors for silver.

“We believe that silver prices are at their lowest level right now, so there is no way out but up,” Boehl said.

Investors will think about silver in 2021

Andrew Hatch, creator of the Hetch Commodity Report, believes silver will rise despite this year's disappointments. He believes investor demand will increase and be the biggest factor for the metal, pushing its price to $17.3 next year, with an average price of around $16 an ounce.

“Given the possibility of a very interesting next year from an economic and political perspective, it will be difficult for gold and silver not to outperform,” Hatch said.

At the same time, it is worth noting that physical investment demand, an important barometer of investor sentiment, fell to its lowest level in nine years.

In the past year, the US Mint sold 15.4 million ounces of American Eagle bullion coins, which is 14% less than last year, when it sold 18 million ounces. Demand for silver coins is down more than 67% from the record 47 million ounces sold just three years ago.

Commodity analysts at Capital Economics also expect investors to return to silver as the price hits $17 an ounce by the end of next year.

“We believe 2021 will be a turning point for silver. This will be driven mainly by a recovery in investment demand caused by the suspension of US monetary policy tightening. In addition, we should expect falling stock and bond prices, especially in the US, which will trigger a reallocation of assets towards safe haven assets, including silver. Thus, we believe demand from ETFs will be 100 million ounces, and we expect similar growth from demand for bars and coins,” they said.

Growing surplus will be a problem for the silver rate

However, not all commodity analysts are so bullish on silver in the New Year. Commodity analysts at Commerzbank say the white metal will rise to $16 an ounce by the end of 2021; The gold-silver ratio will remain near a 25-year high of 85 pips.

The research team believes that the precious metals market will be in surplus at 35 million ounces, the highest level in nine years, while Commerzbank does not believe the situation will change next year.

“Stock investors will not be able to absorb this surplus. Trade conflicts are unlikely to be resolved and the global economy will suffer. This should dampen industrial demand growth,” analysts said.

Bank of American Merrill Lynch said silver will hit $18 next year, but that's not too high because growth is limited by large surpluses.

"There's too much of this metal in the market right now, so it's not going to be great here," said Michael Widmer, an analyst at the bank.

JPMorgan commodity analysts believe that in 2021 the average rate of the precious metal will be $15.84 per ounce.

The most pessimistic bank regarding silver seems to be BNP Paribas, as it forecasts the average rate for 2019 at $14.2 per ounce.

Harry Chilingurian, head of global commodity strategy at BNP, points out that his bank is not forecasting an easy year for gold and silver, preferring to buy Treasuries.

“Given inflation expectations, expressed by the 5-year 5-year forward breakeven rate, which has been falling rapidly since mid-October, we believe that real rates will rise, which will be a negative factor for precious metals in terms of the opportunity cost of holding a non-interest bearing asset ", - he said.

Areas of application

Now about 50% of silver is used in industry. This is due to the special properties of the material. Main areas of application:

Electronics manufacturing. In this area, metal is used due to its thermal and electrical conductivity. Small amounts of this material can be found in old Soviet switches. To create long-lasting electrical circuits on boards, argentum is dissolved. This is how silver nitrate appears, which is applied in a thin layer to the boards. It is used to create supercapacitors. The thinnest silver layer can be found on DVDs.
Chemical production, soldering. Silver has a high tensile strength. Therefore, it is suitable for joining various metal parts. In this case, you can use Ag alloys with other metals and impurities. Due to the antibacterial properties of the material, it is suitable for connecting drinking water pipes. Without silver it is impossible to obtain formaldehyde and ethylene oxide.
Medicine. The antibacterial properties of silver have been known to people for a long time. Previously, vessels for storing liquids were made from it. The water was purified from various bacteria, becoming healthier and tastier. People believed that if you wear accessories made of this metal, you can be cured of various diseases and cleanse your body of impurities. Today, this material is used to destroy pathogens, disinfect medical instruments, and surgeons’ workplaces. Often this metal is added to alloys of instruments for performing operations. With the help of Ag ions, patients are treated for infectious diseases, bones and joints are strengthened.

Silver is used to make various medical preparations.

Medical instrument (Photo: Instagram / surgical_instrument)

Influence of external factors

The value of silver can be determined using the price of raw materials, which initially have the status of a precious metal. The initial cost of one gram remains the same, even despite production in Latin America, North America and Europe. The definition of a gram of silver is, as usual, carried out in England. The change in the price of an asset is influenced by such factors as stock exchange quotes. The exchange rate of the metal should also be determined by the need for raw materials in the jewelry industry, manufacturing, and so on.

The next factor that influences silver prices is changes in world currency rates. The cost of one gram will be determined by bank interest rates, which are changed by the central banks of the world's states.

Advantages and disadvantages

Advantages:

Silver jewelry goes with any outfit. The same cannot be said about gold. Gold items can ruin a person's appearance. It often overshadows the appearance of clothing, attracting increased attention.
It is customary to wear gold jewelry for large celebrations and ceremonies. Silver is suitable for any holiday, business meeting, interview.
Silver jewelry is suitable for both men and women. There are no predominant factors for gender differences.
Durability, strength, wear resistance.

This metal has no serious drawbacks, except that it darkens over time.

What do the media write?

According to representatives, those organizations that are involved in investments tend to restore prices for the precious metal in 2021 in the Russian Federation. The price of the bar is currently $17.34 at the low end and $19.12 at the high end.

European financial institutions also share this position. They are confident that the increase in investment size is happening in silver. HSBC Bank has suggested that there will be a transition from gold to silver bars in the near future. This will have an impact on the demand for the precious metal.

Silver quotes for future years: what is the picture

Anyone who understands and follows this issue knows that silver prices have never been stable. They are installed daily by fixing in London. This is a procedure in which the price of a precious metal is agreed upon, taking into account all factors. The association of traders is engaged in this, and all the world's national banks are based on this quote. As for Russia, here the silver rate is always set only by the Central Bank, and the bar is constantly changing. In our country, unlike others, the price is fixed per 1 gram, although, of course, it would be more convenient to make measurements in ounces according to the world standard. However, you should not be afraid of fluctuations, since investing and earning money on silver should be based on the analysis of fundamental factors, since any fluctuations on the Exchange do not significantly affect the rate.

Digital Yuan

“Shocking news” does not exist without China and/or the Chinese currency. Three years ago, Saxo Bank talked about the transition to petro-yuan: raw material producers were supposed to start concluding contracts for the supply of black gold in yuan.

This time, bankers describe the scenario for the emergence of Chinese digital currency: the same yuan, only in the blockchain (this is a database consisting of blocks that are located, duplicating each other, on different servers). Foreign investors will be given full access to China's capital markets. And the stability of the Chinese currency and the ability of the blockchain to track transactions will eliminate the outflow of capital and the illegal withdrawal of money from the Middle Kingdom.

"Double circulation". Why is the Chinese economy growing so fast? More details

How to invest in silver

Each method of “silver investment” has its own objective pros and cons and key features. Of course, there are no completely safe or 100% profitable investments; there is always a risk, but this is true in any vector.

Here are a few options you can consider:

Purchase of a bank silver bar (925 standard). They can be both small and large, but we recommend paying attention to the latter. Practice shows that it is unprofitable to buy small bars, plus, the larger the bar, the less you pay per 1 gram. The savings are obvious. Among the disadvantages, we note the labor intensity and long period of time for selling the metal, since a bank expert will only spend a week to establish, in exchange for payment, whether the bullion is genuine.
Purchasing investment coins. The price for them is growing steadily, but do not confuse an investment coin with its “colleague”, a collectible one. Investment coins are issued in small quantities with only one purpose - to facilitate investments in precious metals.
Opening a so-called metal account . Everything is simple here: no need to buy bullion, so there are no costs. The account is, de facto, virtual. You technically buy grams by accumulating them in your silver account. Remember that there is no insurance, so if the bank fails, you can at best expect to issue the amount of silver that is equivalent to the size of the account, but this is assuming that the bank has the resources.

Megacities are no longer “mega”

At least 25 million people could be unemployed due to the pandemic, the International Labor Organization predicts. Add in hundreds of thousands of employees who have been sent to work remotely, and you end up with empty commercial real estate.

To support the unemployed population, governments will have to introduce an unconditional basic income, receiving which citizens will remain living where they were born/where they do not have to rent housing/look for work. In this situation, large cities will become freer.

A safe haven or a quiet whirlpool? Is investing in gold really profitable? Read more

Ounce price forecast

Analysts predict quite dynamic growth for silver. The average rate is expected to be $16.75, which is 7% higher than the 2021 average, calculated based on the London Bullion Market Association rate. The situation in the stock markets is far from stable, so investors are looking for alternative assets, and this is one of the reasons for the increase in demand for silver.

Investing in silver. Big hopes
Investing in gold and other precious metals: fact and fiction
Unallocated metal accounts are a profitable long-term investment tool

Vaccine against business

Governments and financial institutions have high hopes for vaccinating the population against COVID-19. The faster citizens are vaccinated, the faster the world will return to pre-quarantine life and the economy will recover. But, as Saxo Bank believes, not everything may turn out to be so positive: if it turns out that central banks have overdone their efforts to stimulate economies, the world will face a surge in inflation. At the same time, the unemployment rate (the most important factor for the American economy) will drop sharply and the US Federal Reserve will allow yields on long-term Treasury securities to rise, investors will flock to riskier assets.

The number of defaults on corporate securities will return to multi-year highs. And the first to go bankrupt will be companies in the offline trade sector.

Inoculation of discord. Why has the COVID-19 vaccine become a tool of war? More details

What volumes will manufacturers offer?

Analysts believe investors can expect silver production to decline 2% this year. There will be slight growth only in the production of gold, lead and zinc. All other precious metal mining options will show negative dynamics.

The supply of scrap silver will increase slightly in 2021. In this regard, the dynamics of the coming months will remain in line with the last 4 years, which showed stable growth. Positive statistics were obtained due to results in the segment of scrap recovered during recycling and acceptance of unwearable jewelry.

The silver market has been well balanced for 3 years now. The precious metal is not stored, everything is sorted out by the manufacturers. Naturally, the balance of supply and demand is reflected in the price.

Range trading

For five days in a row, silver has been trading in the range of $14,800-15,000 per ounce. On Thursday, prices touched the northern edge of this trading range and formed a doji at the top. Now the word is up to the sellers and the expected touching of the southern border ($14,800).

The trading range allows you to conduct fairly successful trading within it and after going beyond it. Players interpret ranges as areas of accumulation of volumes - the longer trading is carried out within the trading range, the more significant the movement will be after leaving its limits.

Below $14,800 we see support at $14,500 and $14,200 per ounce. Resistances, in addition to the already noted 15,000, are at 15,140, 15,445, 15,600, 15,830, 16,150, 16,550, 17,300.

Amazon will “buy” Cyprus

Saxo Bank regularly predicts upheavals in the European Union: either Hungary or Great Britain will leave the community. But in 2021, bankers have prepared a new scenario for the EU: the American company Amazon will buy... Cyprus. The Internet giant will move its headquarters from the States to the island and “literally buy political power at all levels” in this country.

In Cyprus, by the way, Amazon will be welcomed with “open arms”: through corporate taxes, Limassol will try to reduce its debt burden, which is already close to 100% of GDP. Amazon will help the republic rewrite the Tax Code by reducing income taxes.

Golden citizens. Which of our oligarchs has a Cypriot passport? More details

However, European officials will force the American company to change its methods of work on the island. And Cyprus will have to bring its legislation into line with European requirements.