Silver's Bleak Summer Sets Up Bargain Opportunity

With pandemic monetary policy being rolled back across the globe, ongoing supply chain issues, and energy shortages, manufacturing has cooled down. As an industrial metal, this has impacted silver quite a bit. Prices have seen their worst four-month stretch since 2014. In the third quarter, silver went down 16%.

Explosive economic growth has hampered the precious metal space. Gold has been expecting a breakout, given boosted inflation indicators such as CPI, but has so far remained stymied. Gains in bond yields have kept the dollar strong and diminished precious metals.

“Right now, all precious metals are reacting to less-than-anticipated industrial demand and the combination of a shift in the Fed policy of tapering and a stronger dollar; all of those things have made a cocktail for negative metals,” said James Steel, chief precious-metals analyst at HSBC.

When sentiment is pushed so far in the direction of bears, there tends to be big corrections toward the bulls. Silver’s fundamentals remain unchanged: It is a still a key industrial metal for a number of technologies that are expected to dominate the coming decade. 5G towers, EVs, EV charging stations, and solar panels all rely on silver’s unique properties.

Seasonality is also in silver’s favor. Silver is historically pushed to lower prices in the third quarter, but the fourth quarter tends to be the metal’s strongest month. A snapback rally could very much be on the docket as December 2020 was a strong month for silver, and if December 2021 follows historical precedent, then now is an excellent time to get into silver while it is at a bargain.

“Silver presents a better opportunity than gold at the present time,” says Jeff Wright, chief investment officer at Wolfpack Capital. Silver demand is expected to jump 15% in the coming year, with no indication that additional mining will come online in time to meet this new demand. Silver’s coming scarcity presents investors with a unique opportunity to purchase the metal while it is in a position of weakness and reap long-term benefits.

Physically backed ETFs like the Sprott Physical Silver Trust (PSLV ) can offer investors direct exposure to the metal.

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