Silver prices are lagging behind. Investments in renewable energy should change that.
Silver failed to keep pace as other commodities hit record highs. The only consolation is that silver has overtaken an even smaller rise in gold.
They both pale in comparison to the copper rally. Silver can trade “more like a store of valuable assets so far this year, compared to an industrial commodity,” many of which are on the rise, says Michael Cuggino, president and portfolio manager of the family of permanent portfolio funds.
This is “not really surprising given last year’s gains,” he says. Silver futures rose 47% in 2020.
Still, silver could “hit higher highs and higher lows in the years to come,” Cuggino says, with pent-up industrial and jewelry demand likely within the next year.
Concerns about real or perceived inflation, a lack of investment in capacity in recent years and a likely decline in the US dollar as the global economy rebounds will also contribute to fluctuations in the price of silver, says. he.
Silver peaked at nearly $ 30 an ounce in February of this year, following a Reddit post suggesting a short pressure on the metal. At $ 27.88 on May 26, prices are up more than 5% for 2021.
Silver is considered a metal for jewelry and copper is an industrial metal, says Collin Plume, founder and CEO of Noble Gold. Money, however, is the “best conductor of energy”, and if the next superpower is the country that conquers energy, “money is the most important material”.
Plume says the money will likely exceed $ 50 if the Biden administration’s renewable energy plan is approved, increased demand for metal and make the market realize that supplies may be insufficient. Prices hit an all-time high of $ 48.70 in 1980, according to FactSet.
The silver is used in both solar panels and electric vehicles and will play a key role in the switch to 5G wireless network technology, said Ed Egilinsky, managing director and head of alternatives at Direxion. This would likely stimulate the demand for silver, raising prices.
Even so, the money lags behind the earnings of several industrial products. Gold is the biggest laggard among metals, only recently increased by 0.3% since the start of the year, crossing the $ 1,900 per ounce mark for the first time since January.
Both metals underperformed because “there is so much hot money chasing what moves,” such as cryptocurrencies, says Brent Cook, economic geologist and senior advisor to the Exploration Insights newsletter.
Cryptocurrencies have been partly responsible for the decline in gold, but Plume says investors are unlikely to ditch gold for crypto.
The latter is a “risky” investment that some say could make them millionaires by the time they retire, but precious metals are a “hedge to protect them from the volatility” of assets like these. , he said.
Copper, for its part, rallied to record settlement from $ 4.76 a pound on May 11, up nearly 29% this year.
A tightening in production was “inevitable” given the “dearth of new discoveries from top-tier copper deposits,” says Cook, referring to high-quality finds with long-term development potential.
Demand for base metals is “strong and will continue to be,” he says, with prices rising in the long run, “regardless of the noise the Chinese make.”
Chinese authorities have warned against “zero tolerance” for illegal activities that drive up commodity prices.
This could lead to a shift to focus on markets that need metals for industrial purposes, paving the way for “the real value of gold and silver to come,” Plume says.
If the crackdown leads to a redistribution of gold and silver, it “will show the market how many and how many industries” really need it, Plume says.