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2020 has been quite a year. Against the backdrop of the global health crisis, political and economic turmoil and the weakening of the US dollar, commodities known for their safe-haven properties such as gold and silver have become assets of choice for many investors. seeking to diversify their holdings and mitigate risk.
Would you also like to add a bit of “shine” to your portfolio, but you don’t know which precious metal to choose? In this article, we tell you how silver has performed so far in 2020 and look at the factors that will likely determine its price in the future. To help you make informed investment decisions, we also take a look at what the latest silver price predictions look like according to Wall Street analysts.
Silver Price Analysis 2020: The Darkest Hour Is Just Before Dawn
White metal has been on a wild ride so far this year. After a relatively strong second half of 2019, silver started 2020 at $18 per ounce, reaching $19 per ounce in February. However, the selloff in global financial markets followed as the onset of Covid-19 lockdowns prompted investors to exit positions. The commodity fell 38% to hit an 11-year low of $11.74 an ounce on March 18.
Unlike many other assets, silver rallied quickly as investors sought a safe haven in precious metals. Already in July, its price had risen to 24 dollars per ounce. Manufacturing activity began to slowly recover in the summer, increasing industrial demand for the physical metal. This, coupled with strong investment demand, has helped make the silver price outlook brighter than ever.
Meanwhile, the DXY index, which tracks the performance of the U.S. dollar against a basket of major currencies, had slid lower, falling to a two-year low in August, providing further support for stock prices. raw materials.
DXY Index Chart
Silver continued to climb, eventually trading at a seven-year high of $30 an ounce on August 6. Until mid-September, the price fluctuated between $25 and $29 per ounce.
As the US dollar began to rally after hitting a low on August 31, the price of silver fell to $22.68 an ounce on September 23. In the week ending September 25, the metal lost almost 16%.
An ounce of silver remained in the $23-$25 range throughout October as financial markets braced for one of the world’s most anticipated events of 2020: the US presidential election. At the end of the month, the DXY index climbed to the 94 level. And while generally a stronger dollar is a bad sign for precious metals, silver still managed to gain ground.
Silver Price Chart
Due to growing uncertainty, silver prices rose from 29th October, breaking through the $25 per ounce mark to trade at $25.10 at the time of writing on 5th November.
The positive market trend has set investors’ expectations for the price of silver rather high. But will the commodity be able to justify them?
Silver Market Forecast: Factors to drive the price higher in the coming weeks
It is rather difficult to predict the future of a financial asset, especially in these times. First, the US election is always a cliffhanger, and it could be days before a winner is declared. Additionally, the country is now awaiting further monetary and fiscal stimulus from the government and the Fed, which, in turn, will impact the value of the US dollar. Second, a spike in Covid-19 cases around the world has heightened fears of a slow economic recovery, with many countries entering a second lockdown.
Given the current political and economic uncertainty, investors will likely continue to buy the precious metal as a safe haven, supporting silver prices.
On the other hand, renewed measures to control the second wave of coronavirus will likely lead to reduced industrial activity. And since silver is known for its dual properties as precious and industrial metal, investors should be prepared for increased volatility ahead. Although a fall in demand does not necessarily mean a fall in prices, it can nevertheless limit the gains of silver in the short term.
What do Wall Street analysts think of the future of the raw material? Let’s see what some of their latest silver price predictions look like.
Silver Price Prediction for 2021 and Beyond: More Gains Ahead
In a report released in late October, Metals Focus analysts said they see silver prices going “well above” $30 an ounce. They expect silver to see higher momentum following the release of the US election results: “Almost regardless of the outcome of the US election, further broad-based fiscal and monetary stimuli appear inevitable, given a rally economic uncertainty and a still high level of Covid-19 cases 19. The same could apply to Europe where record infections and new containment measures have also cast doubts on the strength of the anticipated economic recovery. So the case for silver (and investing in gold) will remain strong.”
“This is the main assumption behind our forecast that the price of silver will cross the $30 mark in 2021.”
While Metals Focus’ long-term silver price forecast is bullish, they still warn investors of potential short-term volatility: “A slower-than-expected economic recovery and still-high unemployment rates ‘globally will continue to weigh on the recovery of industry, jewelry and silverware demand.’
In September, CIBC also predicted the metal would appreciate, estimating that silver prices would hit $32 per ounce in 2021, then slide to $31 per ounce in 2022 and $30 per ounce in 2023. In terms of the near term, the commodity is expected to average $28 per ounce in the fourth quarter of 2020.
CIBC analysts explained, “The outlook for persistently low real interest rates, rising public debt burdens and geopolitical uncertainty stemming from the upcoming U.S. election all support significant further price appreciation. .
Citi (C) analysts are also optimistic about the metal’s future. The bank’s silver rate forecast is $40 an ounce over the next 12 months, with growth driven by a combination of robust investor demand and a recovery in industrial demand.
The analysts wrote in their advisory note: “We expect investor demand for exposure to precious metals to remain elevated in 2021 as pressure on governments to devalue currencies, concerns over vaccine effectiveness and interest rates equity and questions about equity and bond valuations and rising global debt remain in most scenarios.”
The bank also added that its FX technical team sees the potential for silver to reach $50 an ounce and even climb higher – up to $100 an ounce – in 2021.
Goldman Sachs (GS) also believes that 2021 will be a good year for the commodities market, recommending investors to go long in silver, gold, copper, US natural gas and Brent crude oil.
Predicting a 30% return on S&P’s GSCI (Goldman Sachs Commodities Index) over the next 12 months, analysts wrote: “We see rising trends in social needs alongside investor complacency over the inflation, as increasing the political risks of politics with an inflationary bias. As a result, we expect an increased rotation into commodities as a hedge against inflation.”
Another silver prediction comes from Capital Economics, whose analysts see the price of silver making moderate gains in 2021: “Overall, a market deficit coupled with a rise in the price of gold should lift the price of silver to $25 and $27 per ounce by the end of -2020 and the end of 2021, respectively Demand for non-interest-bearing safe-haven assets, such as gold and silver , is expected to rise as U.S. real yields fall a bit.
Meanwhile, according to JP Morgan’s silver forecast, the commodity is likely to trend lower in 2021.
Based on silver price forecasts from a popular online forecasting resource, Wallet Investor, the commodity will drop to end this year at $23.8 per ounce. However, it is then expected to end 2021 at $26.5 per ounce and appreciate to $31.5 per ounce by October 2025.
On the other hand, according to the silver spot forecast from Trading Economics, the metal is expected to trade at $23.48 per ounce by the end of this quarter and drop to $21.30 over the next 12 following months.
Read more: Copper Price Prediction for 2021: Moderately Bullish with Strong Headwinds
The difference between trading assets and CFDs
The main difference between trading CFDs and trading assets, such as commodities and stocks, is that you do not own the underlying asset when trading a CFD.
You can always profit if the market moves in your favor or suffer a loss if it moves against you. However, with traditional trading, you enter into a contract to exchange legal ownership of individual stocks or commodities for cash, and you own them until you sell them again.
CFDs are leveraged products, which means that you only have to deposit a percentage of the total value of the CFD transaction to open a position. But with traditional trading, you buy the assets for the full amount. In the UK there is no stamp duty on CFD trading, but there is when you buy shares, for example.
CFDs attract overnight costs to hold trades (unless you are using 1-1 leverage), which makes them more suitable for short-term trading opportunities. Stocks and commodities are more normally bought and held longer. You might also pay a commission or brokerage fee when buying and selling assets directly and you would need a place to store them securely.
Capital Com is an execution-only service provider. The material provided on this website is provided for informational purposes only and should not be construed as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We make no representations or warranties as to the accuracy or completeness of the information provided on this page. If you rely on any information on this page, you do so entirely at your own risk.
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