Silver has had a roller coaster ride thus far this year. The white metal’s costs had dropped to 11-year lows to $11.68 an ounce in March as the COVID-19 pandemic induced lockdowns impacted demand that is industrial. Production had been impacted as mines had to power down. However, silver has bounced back once again with a bang and rode past $29 per ounce in— levels last seen in 2013 august. Silver futures for delivery closed at $27.10 an ounce on Sep 17 December. In fact, silver has yielded a gain of 51% year to date, outshining rally that is gold’s of%.
Market uncertainty caused by the pandemic that is COVID-19 the long-standing U.S-China tensions have renewed interest in silver as an investment vehicle. Low-value interest rates, continued liquidity boosts by central banks and recovery in industrial need is working in its favor.
Need for Silver Picking Up
Industrial applications account fully for 60% of the silver consumption that is global. The governments imposed restrictions, which generated a lull in commercial activity to stem the spread regarding the pandemic. It was reflected in the data supplied by the Institute for Supply Management. The U.S Manufacturing Purchasing Managers’ Index (PMI) came in below 50 (which indicates contraction) from March to May. The PMI crossed the 50 mark in June and has remained above 50 for three straight months now as businesses slowly resumed operations. The highest so far in 2020 in reality, the PMI was 56% in August.
Meanwhile in China, the state NBS Manufacturing PMI was 51.0 in 2020 — maintaining the streak of six consecutive months of increase in factory activity august. This is a major recovery from the all-time low PMI reading of 35.7 in February dragged straight down by the coronavirus lockdown that is crisis-induced. China is gradually moving from the crisis and working toward full normalization of economic activities.
The Eurozone Manufacturing PMI came in at 51.7 in August after July’s 51.8, owing to the easing of the lockdown that is pandemic-induced. Manufacturing output growth was reported for an extra successive month in August and attained its level that is highest for over two years.
The pick in industrial activities will require more silver. Apart from this, the white metal’s appeal that is safe-haven remains strong. Tensions between the United States and Asia, and the coronavirus pandemic have been spurring demand that is safe-haven gold and silver. The doubt regarding the U.S. that is upcoming election also continue to support demand. Silver has had a roller coaster ride thus far this year, definitely.
Silver Production-Supply Imbalance is Imminent
Mines at Mexico and Peru, two regarding the world’s top silver countries being producing had to curtail or stop production depending on the government mandates in the sooner part of the season. Also though these countries have allowed the mining sector to resume operations, resurgence of coronavirus cases might end in the closure of mines again, putting supply at risk. The Silver Institute now predicts the silver that is global production to dip 7% in 2020 as a result of the shutdowns earlier this year.
Global efforts to restart and revive economies following the coronavirus pandemic-induced lockdowns are anticipated to sustain demand that is silver year. Demand from the electrical and electronics sector shall account for the bulk of gains. Silver utilization in the market that is automotive likely to register stellar growth, aided by automobiles’ rising sophistication and electrification.
Silver use in 5G-infrastructure and upcoming electronics that is smart also prone to fuel demand. The ongoing revolution in green technologies, driven by the exponential development of new energy vehicles and investment in solar photovoltaic energy, will act as a catalyst that is key. This season while demand stays strong, the shortage in supply will drive silver costs.