will commodity test recent highs again or retreat?


The sparkle has come off the precious metals markets since they hit multi-year highs in the summer of 2020. Silver is down 3% year-to-date, after hitting a low. peak in February and then declined. But does the price action so far in March indicate that the silver price trend will continue to recover from its November lows?

Will the price of silver go up in March? The precious metals sector came under pressure as US bond yields and the dollar began to rise, making them more attractive to investors. But silver resisted better than gold. What does this mean for the future prospects?

This article examines the performance of the silver market and the price targets of analysts. Scroll down for a video in which David Jones, Chief Market Strategist at Capital.com, uses technical money analysis to build a suggested trading position.

Physical demand and inflation expectations drive money volatility

Demand for silver is expected to reach an eight-year high of 1.025 billion ounces in 2021, according to the Silver Institute. A resumption of industrial use of the metal – in semiconductors, solar panels, batteries, drugs and water purification, among other applications – is expected to increase demand.

Consumption in the electronics sector is expected to account for most of the gains, with the rollout of 5G networks and devices leading to a 7% increase in global demand since 2020 to reach 300 million ounces. The deployment of solar panels for renewable electricity generation accelerated in the second half of 2020 and is expected to remain strong in 2021, with a growing number of countries installing new capacity. Demand is expected to reverse last year’s decline to 105 million ounces. And a rebound in auto production along with the growing electrification of vehicles is expected to push demand in this market to just over 60 million ounces.

And investors will likely continue to add silver to their holdings, putting physical investment in coins and bullion at a six-year high.

Silver production is expected to rebound after mines close during Covid-19 restrictions and strike action, and new mines are expected to start production in Mexico and Australia. But although a physical supply surplus is expected this year, it could be the lowest since the market was in deficit in 2015.

One wonders if central banks have underestimated the threat of inflation. If banks like the US Federal Reserve start raising interest rates to fight inflation, demand for precious metals – which increased thanks to low interest rates last year – is likely to fall. Higher interest rates would further raise the US dollar, which generally has an inverse relationship to precious metals.

However, recent silver and platinum sales have been more subdued than in the gold market, Ole Hansen, Saxo Bank’s commodities analyst, noted, favorable winds in industrial demand giving them some relative strength. .

The gold / silver ratio – the number of ounces of silver needed to buy an ounce of gold – has been trending down since September, falling to 65.41 in February, from 68.73 in January and 71 , 80 in December. The Silver Institute expects the ratio to drop from an average of 86 in 2020 to around 68 in 2021, a steep drop as the ratio hit a daily high of 127 in March 2020 volatility.

The price of silver rose 37% from November to February, briefly hitting $ 30 an ounce on February 1 before falling back to $ 26 an ounce. It traded at $ 28 an ounce later in the month, but fell back to $ 25 an ounce in early March.

Silver price table

Watch this video in which Capital.com’s David Jones suggests a short term silver trading strategy.

Analysis of the price of silver: what is the outlook for the price?

Technical analysis for Silver shows support to the January 17th low at $ 24 an ounce, and margin up to the resistance level of $ 28.35. If silver returns to the February 1 level of $ 30 per ounce, it could hit the January 2013 high of $ 32.40 per ounce.

TD Securities analysts are cautious about the near-term outlook for precious metals, including silver. They said in a recent note to clients: “Precious metals remain the victims of the Fed’s reactive approach to rising Treasury yields.

Analysts added: “The latest interview with Fed Chairman Powell confirmed that the central bank remains on autopilot: the tightening of financial conditions seen so far has not yet crossed the red line. Yet, in recent weeks, real rates have risen sharply on the back of the nominal rate hike, without a commensurate rise in inflation expectations, which is at odds with the Fed’s dovish message.

“With the massive Treasury issuance on the horizon, the pressure on higher rates should continue to weigh on precious metals in the near term.”

Heraeus analysts are more optimistic in their latest comment, as “the price is still trading broadly in line with seasonal trends, having outperformed gold since the start of the year.”

They add: “The price should recover with gold. Unlike 2020, industrial uses of silver are expected to support higher prices this year, while investment demand may decline in line with gold’s growing optimism for an economic recovery. Flows to money-backed ETFs have slowed, but holdings remain at historically high levels for now (1,119 million ounces).

Analysts noted that “physical investment has been healthy since the start of the year, with sales of Eagle silver coins in the United States up 77% in January and February. An increase in demand in March 2020, as the risk associated with the global spread of Covid-19 intensifies, means this month’s sales are expected to be lower year-over-year. “

Australian bank ANZ expects the price to peak in March and then a long-term downtrend. Its silver price forecast for March 2021 puts the price at an average of $ 25 per ounce, falling to $ 23.80 per ounce by year-end and $ 22.50 per ounce. ounce by June 2022.

Dutch investment bank ABN Amro also expects the price of silver to average $ 25 an ounce by the end of March, falling to $ 23.50 at the end of December and 22. .50 dollars an ounce by the end of the second quarter of 2022.

Silver Price Prediction

Read more: Gold Price Analysis: Here’s Why Gold Trends Are Confusing

Ready to start?


The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade a CFD.
You can still benefit if the market moves in your favor, or suffer a loss if it moves against you. However, with traditional trading, you enter into a contract to exchange legal ownership of individual stocks or commodities for cash, and you own it until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the total value of the CFD trade to open a position. But with traditional trading, you buy the assets for the full amount. In the UK there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs come with overnight costs to hold trades (unless you’re using 1 to 1 leverage), making them more suitable for short-term trading opportunities. Stocks and commodities are more normally bought and held longer. You could also pay a commission or brokerage fees when buying and selling assets directly and you would need a place to store them safely.

Capital Com is an execution-only service provider. The material provided on this website is for informational purposes only and should not be construed as investment advice. Any opinion that may be provided on this page does not constitute a recommendation of Capital Com or its agents. We make no representations or warranties about the accuracy or completeness of the information provided on this page. If you rely on the information on this page, you do so entirely at your own risk.

Source link


Comments are closed.