Michael Pento’s Silver Forecast For 2021
Arcadia Economics, Released on 11/17/20
There’s a lot going on in the financial markets right now, and the well-renowned Michael Pento joined me on the show to share what he’s seeing, how he’s responding to the election from an investment standpoint, and what he sees for gold and silver in 2021.
Michael Pento
2020 has been quite a year. Against the backdrop of the global health crisis, political and economic turmoil and a weakening US dollar, commodities known for their safe-haven properties such as gold and silver have become assets of choice for many investors looking to diversify their holdings and mitigate the risks.
Do you also want to add some “shine” to your portfolio but cannot decide which precious metal to go for? In this article, we walk you through silver’s performance so far in 2020 and check out what factors will likely drive its price going forward. To help you make informed investment decisions, we also review what the latest silver price predictions look like according to Wall Street analysts.
Silver price analysis for 2020: the darkest hour is just before the dawn
The white metal has been on a wild ride so far this year. After a relatively strong second half of 2019, silver started 2020 at $18 per ounce, inching higher to $19 per ounce in February. However, the broader sell-off across global financial markets followed as the start of Covid-19 lockdowns prompted investors to exit their positions. The commodity plummeted 38 per cent to hit an 11-year low of $11.74 per ounce on March 18.
Unlike many other assets, silver recovered quickly as investors sought a safe haven in precious metals. Already by July, its price had soared to $24 per ounce. Manufacturing activity started to slowly recover in summer, increasing industrial demand for the physical metal. This, coupled with strong investment demand, helped to make the silver price outlook brighter than ever.
In the meantime, the DXY Index, which tracks the performance of the US dollar against a basket of major currencies, had been sliding lower, falling to a two-year low in August, giving further support for commodity prices.
DXY Index chart
Silver continued to push higher to eventually trade at a seven-year high of $30 per ounce on August 6. Until mid-September, the price was fluctuating in the $25-$29 per ounce range.
As the US dollar started to pick up after bottoming out on August 31, silver prices fell to $22.68 per ounce on September 23. During the week ending September 25, the metal shed nearly 16 per cent.
An ounce of silver remained in the range of $23-$25 throughout October, with financial markets getting ready for one of the world’s most anticipated events of 2020: the US presidential election. At the end of the month, the DXY Index climbed to the 94 level. And while typically a stronger dollar is a bad sign for precious metals, silver has still managed to gain ground.
Silver price chart
On the back of the rising uncertainty, silver prices have been on a hike from October 29, breaking through the $25 per ounce mark to trade at $25.10 at the time of writing, November 5.
The market’s positive trend has set investors’ silver price expectations rather high. But will the commodity be able to justify them?
Silver market forecast: factors to drive price in the weeks ahead
It is rather hard to predict the future of any financial asset, especially in times like these. Firstly the US election is still a cliffhanger, and it could take days before a winner is declared. Moreover, the country is now waiting for further monetary and fiscal stimulus from the government and the Fed, which will, in turn, impact the value of the US dollar. Secondly a spike in Covid-19 cases worldwide has exacerbated fears of a slow economic recovery, with many nations going into a second lockdown.
Given the ongoing political and economic uncertainty, investors are likely to continue buying into the precious metal as a safe haven, supporting silver prices.
On the other hand, renewed measures to control the second wave of coronavirus will likely see industrial activity curtail. And as silver is known for its dual properties of both a precious and industrial metal, investors should get ready for increased volatility ahead. While lower demand does not necessarily mean a plunge in prices, it can still limit silver’s gains in the near term.
What do Wall Street analysts think about the commodity’s future? Let’s check what some of their latest silver price forecasts look like.
Silver price forecast for 2021 and beyond: more gains ahead
In a report published at the end of October, analysts at Metals Focus said they see silver prices going "well above" $30 per ounce. They anticipate silver to get an upward momentum after the results of the US election are known: "Almost irrespective of the outcome of the US election, fresh large-scale fiscal and monetary stimuli seems inevitable, given an uncertain economic recovery and still high Covid-19 cases. The same may apply to Europe where record infections and new lockdown measures have also cast doubts about the solidity of the anticipated economic recovery. The case for silver (and gold investment) will therefore remain strong."
"This is the main assumption behind our forecast that the silver price will break through the $30 mark during 2021."
While Metals Focus’ long-term silver prices forecast is bullish, they still warn investors of the possible near-term volatility: "A slower than expected economic recovery and still elevated unemployment rates globally will continue to weigh on the recovery in industrial, jewellery and silverware demand."
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