Silver Will Outperform Gold in 2021
Updated: Jun 29, 2021
Analysts at Germany’s Commerzbank have a bullish forecast for silver in 2021, according to their recently released outlook for precious metals report. The bank’s analysts foresee silver outperforming gold as the global economy begins to recover from the COVID-19 pandemic, thus fueling the industrial demand for silver. “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 also 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,” Commerzbank analysts explained. Commerzbank foresees the price of silver to increase to approximately $32 an ounce by Q4 of next year.
“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 other lockdowns and supply problems should be significantly reduced.
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,” stated the bank’s commodity analysts.
Additionally, Commerzbank forecasts a bullish 2021 for gold as well, fueled by continuing monetary and fiscal policy to ease the repercussions of the Coronavirus pandemic on the global economy.
“We do not expect a change in the ultra-expansionary monetary and fiscal policy despite the upcoming vaccinations. Instead, governments and central banks will continue to be required to cushion the negative effects of anti-corona measures on the economy and society. If the necessary fiscal stimulus measures are not adopted in time due to resistance in the legislative process, pressure on central banks to step into the breach with further easing measures would increase,” explained Commerzbank analysts.
Commodities analysts at the bank expect that given the global pandemic’s economic repercussions will still be felt well into the new year, the price of gold will surge past $2,000 an ounce. Commerzbank anticipates that the precious metal could trade at around $2,300 by Q4 of 2021.
“Even if, as we expect, the corona pandemic can be brought largely under control in the second half of 2021 through sufficient immunization of the population, the enormously increased public debt levels caused by the corona policy and the inflated balance sheets of central banks will remain in place for a long time to come.
The arguments in favor of gold have not changed for the central banks at all. The US dollar-denominated bonds held in the foreign exchange reserves hardly generate any positive nominal yields; in fact, the real interest rate on these bonds is almost entirely negative. The euro-denominated bonds even have a negative nominal yield. The price development of gold in this challenging year has also shown that gold offers great advantages as an integral part of foreign exchange reserves,” said the analysts.
Headquartered in Frankfurt, Commerzbank functions as a universal bank. As of 2019, it was the second-largest bank in Germany and had locations in over 50 countries around the globe.
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