While gold will continue to attract a lot of attention in 2021 as prices are expected to reach new all-time highs, analysts at Commerzbank are suggesting that investors keep their eyes on silver.
In their 2021 precious metals outlook report, published last week, the analysts at the German bank expect that silver will continue to outperform gold as an improving global economy boosts the precious metals industrial demand.
Looking at prices, Commerzbank sees silver averaging next year around $26.50 an ounce. Prices are expected to peak around $32 an ounce by the fourth quarter of 2021. Commerzbank’s silver outlook represents a gain of about 30% for the year compared to current prices. March silver futures last traded at $24.62 an ounce. Meanwhile, Commerzbank sees gold prices pushing to a high of $2,300 by the fourth quarter of next year, representing a gain of 24% over the next 12 months.
“The arguments for a further increase in the silver price are, in our opinion, overwhelming. The flood of cheap money is likely to lift not only gold but also silver, which in addition still has catchup potential compared to gold. Recovery of the economy should also boost industrial demand. We, therefore, expect silver to resume its upward trend,” the analysts said.
Although the metal’s industrial applications are expected to pick up next year, Commerzbank said that investment demand would remain the important driver for prices in 2021.
“Industrial demand is expected to pick up in 2021, as the factors that weighed on the economy this year are likely to lose their influence. With the availability of effective vaccines and the progressing vaccination of the population, the risk of further lockdowns and supply problems should be significantly reduced,” the analysts said. “However, mine production is also expected to return to normal. Both effects are likely to cancel out each other. Thus, it will probably depend on the other demand components in which direction the pendulum swings in the market balance.”
One wild care for silver is the prospect of a new administration in the White House pushing further development of renewable green energy technology, the analysts said.
“Biden wants to restructure the US economy in the direction of carbon neutrality and for this reason wants to push solar energy massively. The construction of 500 million solar panels is planned over the next five years. Whether these plans can be implemented, however, also depends on the majority situation in the US Senate, on which run-off elections will decide at the beginning of January. In Europe, too, the trend towards climate-friendly energy is likely to continue and encourage a further increase in solar capacity,” the analysts said.
The bank also noted that although silver is an important component in solar panels, the amount of metal that is actually needed has been declining.