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(Kitco News) – The silver market is experiencing extreme price action because a multitude of retail investors are unable to create sustainable short-term pressure on the market; however, one bank still sees potential for the precious metal.
In a report published on Tuesday, Michael Widmer, analyst of precious metals at Bank of America, said he was still strong about silver, expecting prices to rise to $ 35 with the chance of prices up to $ 50 per ounce. will rise.
Widmer added that Monday ‘The failed rally of more than $ 30 per ounce is a little worrying for the market in the short term. However, he also said that the market is still supported by strong fundamentals. His comments come as the silver prices give up almost all Monday ‘their profits. Silver futures in March last traded at $ 26.77 per ounce, 9% lower on the day.
‘The rate at which prices have risen is worrying, and some of the traditional markets such as China are now trading at a deep discount, ‘he said. ‘Although we basically stay, it’s worth following, because a lack of commercial purchases ultimately means that the rally may come to an abrupt end once the recent strong investment buy fades. ”
While the silver market has experienced unprecedented volatility over the past week, Widmer said the price action does not fall outside historical norms.
‘Many of the usual market statistics have remained within recent ranges, indicating that disruptions were manageable. In particular, trends for retail investors do not appear to be significantly disruptive, ”he said in the report.
‘If we dig a little deeper, ETFs have taken up the equivalent of 84% of the metal stored in vaults linked to the London Bullion Market Association (LBMA), which is a high ratio. That said, although AUMs have risen in physically supported ETFs, many of the usual benchmarks, including prices / NAVs, have generally remained within the range seen late. In another corner of the market, silver EFPs also rose, but in the same way the levels remained within known valuation bands, ” he added.
Widmer looked at the recent volatility and said it is still silver as the fundamental outlook on supply and demand supports higher prices. He noted that the main stock of silver has declined and that the market is relatively balanced as miners have reduced production over the past few years.
Looking at the supply side, Widmer said he expects silver to get a big boost this year as President Joe Biden moves forward with his aggressive policy on climate change and the development of new green technologies.
He explained that the demand for solar panels has increased because the Biden administration wants to reduce emissions to zero by 2035.
‘To achieve this, electricity generation is likely to need to be revamped, possibly also through an increase in investment in solar panels. According to our basic case, we have a shortage of silver this year, a shortage that would be passed on under Biden ‘‘s plan, ”he said.
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