Silver edged above US$26 per ounce on Monday (July 27), adding more that 31 percent to its value since January.
Safe haven demand and record exchange trade fund (ETFs) inflows have been the primary catalysts for the metal’s sustained growth in Q2. Reinvigorated animosity between the US and China, and concern a second wave of COVID-19 will further weaken the global economy have been key drivers recently.
The white metal is now back in territory unseen since September 2013, with motivators in place to move it higher.
The price surge is promising to investors and market watchers; however Jeffrey Christian of the CPM Group urges caution.
“One has to be careful looking at silver prices this year. They plunged in March and then recovered. While one can say prices rose sharply in April and May, the reality is that prices rose sharply all the way back to where they were from September 2019 to February this year,” the head of CPM group said in a July 14 email.
Despite the challenges associated with gauging the silver market, EB Tucker, director at Metalla Royalty & Streaming (TSXV:MTA,NYSEAMERICAN:MTA), sees potential in this silver market.
“Silver is much more exciting,” said the author of “Why Gold? Why Now?”
He added: “It’ll go up close to US$30 before there’s any trouble. Then you’ll have some sort of pause and I don’t know we’ll have to see what it looks like there.”
Tucker pointed out that during the last silver bull market the price climbed 1,000 percent. However the metal is also prone to hard crashes. As recounted by Tucker, who said, “silver has long history of being speculative.”
He then recapped silver’s volatile performance in the late 70s early 80s. The price hit its all-time high of US$49.45 before sharply falling to US$3.55. The white metal reached similar highs in 2011 without falling as low after.
Silver’s volatility and price manipulation make it a hard metal to trust, something that Tucker also acknowledged.
“I think it’s fair to think that silver is not to be trusted,” he said. “But we don’t care about what happened 40 years ago. We care about now and in March you know the price went down under US$12.”
He explained that even with the spot price below US$15 following the spring market crash, that discount did not translate to lower coin prices.
“(Coin dealers) couldn’t get any coins and if they could get any they needed to charge US$9 to US$10 a coin over the spot price. So that means the price was quoted US$12 and the price for an actual coin was US$21 to US$22 at least, that’s not right something’s crazy about that.”
While a low spot prices may in theory be good for coin buyers, they are not for small miners. Pure silver plays and juniors cannot produce the metal at the low rates.
“So you combine bad reputation, seven or eight years of straight down no break even in between, and no company can mine it; well this is all stuff that you look for when you’re about to see a rocket ship take off,” he said.
Tucker sees silver hitting the high US$20 range sometime in the next two months.
When asked if prices could reach US$40 this year, CPM Group’s Christian offered a reserved forecast.
“We expect prices to rise during August, and then plateau or maybe decline a bit during the September to November period, with higher prices next year.”
In terms of what trends will motivate silver during H2 2020, the head of CPM Group offered his thoughts.
“US politics will heavily influence investor interest in silver. Also, the pace and direction of any economic recovery that might begin to emerge, and whether or not the world is hit by a fierce second wave of the coronavirus.”
“Our view of the next few years’ economic trajectory remains unchanged,” said Christian. “There are offsetting signs in the economy of strength and renewed weakness, while political developments in the United States, United Kingdom, and other countries create a fog of uncertainty that makes it hard to say how things will emerge, and also present a host of concerns that any economic recovery could be interrupted.”
Reserve Your Free Step-by-Step GuideLearn Why Everyone Should Own Real Gold & Silver
INSIDE THIS INVESTMENT GUIDE YOU WILL LEARN: • How Gold & Silver can protect your savings & retirement accounts • Types of Gold & Silver products available for Home Delivery • How a Gold & Silver IRA can protect your Retirement account