The price of silver could skyrocket in 2021 to a record $ 50 per ounce, Saxo Bank analysts predict. This growth will be driven by both, the “usual” measures that many governments have been adopting to fight the crisis caused by the pandemic and by an extraordinary factor.
This positive dynamic could be caused by purely economic reasons such as the loosening of monetary policy by the Federal Reserve and the depreciation of the US dollar. But behind it could also be a factor that goes beyond the economic sphere and is closer to high technology and ecology.
The keys to the economic engine that will drive prices
Saxo analysts expect the US dollar to continue to weaken even after the epidemiological situation improves in 2021 as a result of the general vaccination of the population. The vaccines will kill the virus, but they will not be able to solve the debt problem that is still spreading throughout the world, specialists emphasize.
Advances in medicine will be unable to cure what ails the global economy, at least that’s what Peter Schiff, president of the Euro Pacific Capital brokerage firm, believes.
“The problem is not really the fact that we have a disease, but that we’re addicted to the cure, which was cheap money and all this debt. And so now, it’s the addiction to the cure that’s the rea. The disease doesn’t even matter anymore problem”noted the eminent economist Peter Schiff in his podcast posted on YouTube.
Saxo Bank also warns of an increase in inflation that can be expected in 2021. As Schiff pointed out, by injecting so much stimulus into the economy in the past, the US Federal Reserve has created a situation in which it will never be able to combat widespread price increases.
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It may take time for lawmakers to respond to this growth because they will seek to “offer maximum support to their economies still in recovery,” Danish bank analysts note in their report. That’s why the US Federal Reserve says it’s going to let inflation skyrocket, because they don’t really have a choice.
A non-monetary engine
Apart from the aforementioned economic factors, the price of silver will show an upward trend thanks to the growing demand for applications related to green transformation in many countries. These include photovoltaic cells used in the production of solar panels. Solar energy production is expected to almost double by 2025, according to a report published by the Instituto de la Plata.
Today it is no secret that silver has the lowest electrical resistance of all metals at normal temperatures. For this reason, “possible substitute metals cannot equal silver in terms of energy production per panel,” the authors of that study noted.
As a result, demand for the white metal would far exceed supply, which could cause a supply crisis in 2021. All of this threatens to thwart political support for planned solar investments under Biden’s presidency, affect targets set in the European Green Deal, the aim of achieving carbon-neutral emissions in China by 2060 and other initiatives.
Furthermore, PV systems that do not contain silver tend to be less reliable and have a shorter lifespan, posing serious problems for their widespread development for commercial purposes.
In terms of silver supplies, production at the mines has been severely affected by the pandemic. This is expected to fall 6.3% to around 780.1 million ounces in 2020. However, such negative dynamics would not be caused only by the expansion of infections in the world and the global closure.
Mine production tended to fall before the pandemic when it suffered a 1.3% drop in 2019. Saxo Bank analysts explain this trend with the fact that more than half of the silver is extracted from the earth in the form of a by-product of zinc, lead and copper mining.
“This makes it difficult for miners to meet the excess proportional demand for silver”conclude the entity’s experts.