When I made the prediction two months ago, we knew nothing of silver’s sudden fame and the renewed focus on its upside potentials. In it, I set out the perfect storm of developments that could catapult silver and see it double to $50/oz during 2021. Not least the green transformation, about which I wrote:
“But the real turbocharger for the silver price in 2021, even relative to gold, is the rapidly rising demand for silver in industrial applications, especially those driving the green transformation such as photovoltaic cells used in solar panel production. In fact, a real silver supply crunch is on the cards in 2021, and it frustrates the full throttle political support for solar energy investments under a Biden presidency, the European Green Deal, and China’s 2060 carbon neutral goal, among other initiatives.”
In our Quarterly Outlook released a few weeks back, I highlighted the fundamental reasons why I see gold reaching $2,200/oz and silver $35/oz this year. The latter representing a drop in the XAUXAG ratio to the low sixties, with silver on top of the general reflation theme receiving an additional boost from the heightened focus on rising industrial metal demand, especially for those needed in the green transformation agenda.
In conclusion, I maintain a positive outlook for precious and semi-precious metals but whether we see an outrageous gain in silver remains to be seen. Called the “populist” metal by Goldman Sachs there is no doubt that it has received a whole new army of followers in recent weeks, which should ensure plenty of headlines and attention during the coming months. What matters at the end of the day, however, remains the balance between supply and demand, especially industrial demand, and that is where we need to focus in order to gauge whether silver will have a normal, but volatile year, or indeed an outrageous one.