Silver enthusiasts have had a psychologically challenging, last few weeks. With the white precious metal gaining about 47% in 2020, the best year since 2010, it easily outpaced gold’s 25% return. In reality, the white metal is down 9% so far in 2021.
Moreover, nearly all the fundamental market drivers have remained intact. The first driver is on
performance, silver performed impressively in 2020, and it was due to correct. The pattern is typical of bull markets. The second pressure point is a rising US dollar index, which is attributed to rising long-term bond yields. However, experts highlight that the trend will run its course and exhaust itself. Plus, higher yields are a sign of soaring inflation expectations and burgeoning economic activity. The best approach at this point is patience, and experts cite that this is almost the end of correction for the white metal.
In a recent report, Bank of America’s commodity analysts underscored that they expected to see silver prices averaging at $29.28 in 2021. The observation is based on their expectation for a discreet supply deficit of 281M ozs. Furthermore, what could keep a bid under the silver price and also help it rise in 2021 is the push for green energy blended with massive infrastructure spending and stalwart investment demand.
The takeaway is silver corrections come with the territory. So, investors need to adopt and use them to their advantage. Silver dropped 10% or more four separate times between 2002 and 2006. It is quite logical to look at what silver did after those corrections. Experts highlight that in nearly every case, the white metal went on to establish new bull market highs.
Over the past 21 years, silver has produced an average annual return of 16.48% (Chinese Yuan) and 8% (Swiss Franc). Plus, in USD, the white metal averaged 11.43% per year. Over the last two decades, the world average is 11.93% gains annually. So, the overall trend observed is – up, which spells a bull market.
In terms of a longer-term perspective, the silver price today is near $24, which suggests a lot of upside remaining ahead. In fact, at $25 in comparison to the $120 in 1980, the white metal is around 80% below that peak. Moreover, current economic fundamentals like debt, deficits, spending, interest rates, and supply/demand outlook are quite bullish, that the 1980 $120 level is likely to be easily surpassed.
If one has been holding or buying silver and/or silver stocks over the past several months, what makes sense is to sit tight or gradually add to some positions, if they’ve gotten cheap. Investors should emphasize properly positioning in this market. It is time to be a silver contrarian. As experts highlight $100 silver is well within reach.