Click here
to read the previous silver price update.
The third quarter marked silver’s best price performance for 2020, adding more than 60 percent to its value by mid-August. Surging to a 7-year high, prices neared US$30 per ounce creating a value opportunity for silver investors.
Pushed higher by
precious metal
demand,
industrial
declines were less impactful to silver’s ascent into record territory than initially expected. Heightened exchange trade fund buying also factored in the metal’s push to US$29.14.
By the end of September the white metal shed 27 percent of its Q3 gains to hold in the US$24 range.
After starting the year at US$18.02, silver faced incredible headwinds late in Q1, as markets fell sharply in response to the
COVID-19
dominoing global lockdowns that stunted supply chains, and paralyzed international manufacturing.
Chart via
Kitco
.
Dipping to an
11-year low
— US$12.59 — the road to recovery was quick as investors looked to profit from the record lows, while also looking for alternative currency metal investments.
By July prices had climbed back to their January start values — US$18.02 — and positioned to rise rapidly.
“We have a perfect storm to send both
gold
and silver higher,” Chris Marchese, senior analyst at GoldSeek
told INN in July
.
He continued: “I think the second of half of 2020 is going to be great. There’s a lot of catalysts (that are) good for the precious metals, bad for mankind. A lot more money printing (and) let’s see who wins the election — I don’t think it’ll be Trump.”
Watch the video above to hear more from Marchese about the precious metals market.
Concern that economic recovery would be more prolonged due to rising infection stats motivated both silver and gold throughout July, pushing the yellow metal to US$1,976 per ounce, while sister metal silver was holding at US$24.47.
During the Sprott Natural Resource Symposium, held in late July, mining entrepreneur Ross Beaty made a case for silver’s rise in the second half of 2020. Noting that the metal’s duality would be a significant catalyst to growth.
“The thing about silver is you’ve got to understand not just the conditions in the precious metals market … but you’ve also got to understand what’s going on in the industrial market, because silver has all these industrial uses,”
said
the chairman and founder of Equinox Gold (TSX:
EQX
,NYSEAMERICAN:EQX) and Pan American Silver (TSX:
PAAS
,NASDAQ:PAAS).
He went on to point out that silver could outperform gold as it has done in the past if currency, safe haven and industrial demand pick up simultaneously.
Silver price update: Gold/silver ratio falls, prices rise
In the first week of August, prices rose sharply driving silver to US$29.14
a 7-year high
. The move forced the silver/gold ratio lower, reaching 69:1on August 7. The dramatic dip stood in stark contrast to the all-time high the ratio reached in March of 126:1.
Listen to David Morgan discuss where the silver price could go.
Silver’s appeal as a leveraged play against gold worked especially in its favour during Q3. Inflows to exchange traded products neared record levels in August when 105.2 billion ounces reported in global holdings.
Physical silver demand has also picked up this year, as another store of value in addition to physical gold.
“Globally, silver bullion coin demand is up strongly, with a 65 percent increase in demand over the first three quarters,” notes a
report
from The Silver Institute. “This was due to strong sales in the two key bullion coin markets, the U.S. and Germany, with both seeing substantial double-digit gains over the first nine months.”
The US and Germany also led in bar demand, which has surged higher in 2020.
Safe haven status continued to buoy silver, despite the metal slipping off its high to the US$28 range by the beginning of September.
Over the next 30 days pressure from weakened industrial demand and a decline in global jewelry sales -which could top 20 percent annually- provided headwinds for the white metal.
While it’s still too early to say whether silver will outperform gold in 2020, the white metal did outshine its yellow sister in Q3. For the three month period silver added 34 percent to its value, and during its quarterly peak it added more than 60 percent year-to-date.
Conversely the third quarter of 2020 saw gold add 6.9 percent to its value total, and at its highest 16 percent when it reached an all-time high of US$2,063.
Silver price update: Uncertainty and an election
As noted, the pandemic has created much uncertainty in the market throughout the year and is still infusing volatility as second waves begin to descend and countries enter another round of lockdowns. There is also the pending election which is likely to impact markets and the resource space greatly.
Michael DiRienzo director of the Silver Institute thinks there will be another stimulus package for Americans but it likely won’t come until after the November vote; which he admits will make the weeks following the election interesting.
“Both candidates are talking about a huge stimulus bill wrapped into an infrastructure bill at the beginning of their term, so if Joe Biden was elected, that would be on January 20. And I don’t think Mr. Trump would want to start doing that, before the new Congress was sworn in, also, early in January.”
Regardless of the winner the head of the Silver Institute sees silver as the real winner, as each candidate’s platform would use silver as a component of either
technological
advancement or green energy growth.
“Biden has already indicated he wants a massive, clean energy infrastructure plan, which can only assume solar power would be a major component. So that would bode very well, for silver,’ he explained, then continued.
“President Trump wants to focus more on an infrastructure plan. So that requires building up 5g networks, construction and so forth, which will use and chew up a lot of silver as well.”
Pointing out that it is speculative at this point, ultimately it has the potential to work in silver’s favour, especially in a year where the estimated global industrial fabrication demand will have declined by 10 percent.
Silver price update: Where will the price go?
Continued pressure from fractured supply chains, and weakened industrial demand is projected to benefit silver investment demand for the remainder of the year.
“Dramatic monetary easing policies and fiscal stimulus measures seen in several key markets, and potentially again in the US before the end of 2020, could boost inflationary expectations and weigh on the US dollar, continuing to raise the appeal of safe haven assets, including precious metals,” highlights The Silver Institute release.
Continuing to hold at the US$24 level the case for silver moving higher into 2021 is compelling and as many investors look to hedge against inflation with more than just gold.
As Independent Speculator Lobo Tiggre pointed out the white metal has performed exceedingly well amid the challenges of 2020.
“We have to remind people that silver is not just poor man’s gold , it has tracked with gold, better than I expected through this time of economic turmoil,” he said, adding that there is no credence to the idea that silver is no longer a currency metal and only functions as an industrial commodity.
“It does clearly have its industrial side and got whacked harder than gold in March during the meltdown that’s true. But silver is still tracking gold and many days where markets have been down, and industrial commodities have been down silver has held up with gold.”
Tiggre sees the trajectory of both metals continuing to be positive going forward.
“I’m very comfortable with gold and silver.”
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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