This has been a tumultuous year for investors, with Brexit, negative bond yields, a global trade war, an oil price crash, and, of course, a worldwide pandemic that’s ushered in what’s expected to be the worst recession since the Great Depression. The question, then, is whether our money can be safely invested anywhere.
Fortunately, many experts are bullish about precious metals. Although the price of gold has risen roughly $400 per ounce in the past year, some analysts suggest that silver may be the better buy in the medium- and long-term.
How Has Silver Fared So Far In 2020?
Virtually every asset price fell in March due to the “sell what you can” mentality many investors held during this frantic period of uncertainty driven by the coronavirus and an oil price war. However, allocating a portion of your portfolio to silver bullion would have softened the blow caused by the coronavirus sell-off.
Is Silver Susceptible to Price Suppression?
It’s worth noting neither the U.S. federal government nor the Federal Reserve system can assert significant control over the price of silver. In 2019, the U.S. accounted for an estimated 3.6% of global silver production (980 metric tons), compared to Mexico and Peru, which produced 6,300 and 3,800 metric tons, respectively. Therefore, the price of silver is ultimately beholden to global market forces rather than domestic price manipulation.
Silver and Industry:
Silver is a metal with many industrial applications. In 2018, silver was heavily utilized for industrial manufacturing — in particular, for use in photovoltaic solar panels, brazing alloys and solders, electronics, and ethylene oxide. This figure doesn’t include silver used in the production of jewelry, which required another 200 million-plus ounces that year.
What’s particularly noteworthy about silver’s industrial usage is that it’s prominent in the production of solar panels and batteries, which bodes well for the metal’s long-term price. The worldwide market for solar energy was expected to rise in value from $52 billion in 2018 to $223 billion by 2026.
Regarding supply, a January 2020 report by Scotiabank determined the global supply of silver is “fundamentally oversupplied” but remains attractive to investors as a gold proxy. The authors note that silver can play an important role as a currency hedge, and upside growth is expected due to modest increased industrial demand. Overall, the report is mixed about silver prices for 2020, estimating possible outcomes of $15-$23 per ounce, depending on gold performance and demand drivers. The authors estimated that $17.50-$21 per ounce is the fair, market-aligned range for silver in the year ahead.
The Takeaway: A Worthwhile Hold but Not Without Risk:
The consensus among market watchers, researchers, and precious metals experts are that the long-term forecast for silver is positive. Although no asset is without downside risk, the case for silver is supported by heavy industrial use as well as its strategic importance as a currency hedge during times of uncertainty. However, the strength of the dollar will play an important role in silver’s performance.
Silver long (Buy)
ENTER AT: 18.385