(Kitco News) – A global slowdown caused by the global COVID-19 pandemic will weigh on silver industrial demand this year, but according to the latest research for the Silver Institute, investment demand will drive prices higher in 2020.
“The silver market is small so it doesn’t take a lot of money to really push prices higher,” said Phillip Newman, director of Metals Focus, the research firm behind the Silver Institute’s World Silver Survey 2020.
In a telephone interview with Kitco News, Newman said that investor demand for silver, led by a rally in gold, could push prices to $19 an ounce this year. The comments come as silver prices struggle to hold gains above $15 an ounce. May silver futures last traded at $14.96, up 0.6% on the day.
Metals Focus’ price target represents a more than 26% gain in silver from current prices. However, Newman warned that analysts still expect silver to underperform gold, which will remain the ultimate safe haven as coronavirus uncertainty continues to dominate the global economy and financial markets.
Looking at the gold/silver ratio, Newman said it should come down from last month’s record highs but still remain elevated around 90 points. The ratio traded around 114 points Wednesday, meaning that it take 114 ounces of silver to equal one ounce of gold.
“The rally starts with gold and then moves to silver as investors start to see value in the precious metal,” he said.
One of the key indicators that Newman is watching to gauge silver’s investment potential is speculative interest. Newman noted that the latest trade data from the Commodity Futures Trading Commission shows that net-bullish positioning in silver is at its lowest level in a year.
“There is significant room for speculative investment to come back into the market,” he said. “That is one of the most important investor indicators we are watching right now.”
Along with stronger gold, Newman said that lower volatility in silver prices will also help to attract investors back to the market.
Along with strong investor interest in silver-backed exchange-traded products, Newman said that analysts also expect to see higher demand for physical investment. Metals Focus expects demand for silver bullion and coins to rise 16% this year.
The optimistic silver price outlook comes as industrial demand is expected to fall this year. Overall the firm sees physical silver demand dropping 3%, totaling 963.4 million ounces. The firm also noted that this is the lowest demand level for the precious metal since 2009.
Helping to provide some balance to the marketplace is the fact that Metals Focus said that supply is also expected to drop by 4% this year. Global silver supply is expected to come in at 978.1 million ounces in 2020, also the lowest level since 2009, the firm said.
At the start of the month, Mexico declared mining a non-essential service, which forced many mines to shut down their operations. Mexico is the world’s biggest source of primary silver and represents about 23% of total global supply.
Crunching all the numbers, Metals Focus said that silver’s supply surplus is expected to total 14.7 million ounces, a drop of 53% compared to the stockpile created in 2019.
Although silver’s industrial demand is expected to be lackluster this year, Newman said that he is optimistic the sector will survive the impending global downturn.
For example, weak global growth and low oil prices are expected to weigh on solar power demand. Still, Newman said that renewable energy will still represent an important market for silver.
“Some countries are expected to postpone new capacity for solar energy, but the sector is solid enough to survive this drop,” he said.
Newman said that the electrification of the auto sector is also a growing area of demand for silver. A global depression will weaken car sales, but demand for silver will remain.
?“Every new car that comes out uses more than the older version,” he said.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
