Gold has outperformed the commodity segment, if a 10% plus price rally, since the start of the year, is anything to go by. The yellow metal is currently trading near seven-year highs after a meteoric rise in response to interest rate cuts as well as growing concerns about the impact of the Coronavirus scare. Amidst Gold’s explosive run, Silver another precious metal has remained range-bound having struggled to take out the $20 level.
Silver Price Consolidation
As Gold continues to register higher highs in the market, the biggest question among investor is how Silver will perform in 2020. The Silver Institute believes the white metal has what it takes to register substantial gains in 2020. Increased use of white metal in the industrial sector is one of the factors the Institute expects to drive Silver prices.
After breaking out in December after a steep pullback from one-year highs of $19.69, the white metal has struggled to rise past the $19 mark. Price rejection has been the order of the day, with the precious metal price action activity remaining subdued at the $18 handle. The consolidation at the $18 mark has come even on investors shifting their attention to safe havens. Gold has been the biggest beneficiary rallying in the process to six-year highs.
Silver poor performance compared to Gold could be attributed to, among other things, the Coronavirus. Unlike Gold, Silver plays an important role in the industrial sector. Demand for the precious metal is usually high in China, the industrial heavyweight of the world.
However, with the Coronavirus bringing almost every sector of the Chinese economy to a standstill, Silver’s industrial demand has edged lower in recent months, consequently having a negative impact on price. Amidst the low demand, the Silver Institute believes silver industrial uptake will pick in the second half of the year, on coronavirus risks subsiding.
Silver 2020 Outlook
According to the Silver Institute, macroeconomic and geopolitical conditions should remain supportive of industrial metals such as Silver in the second half of the year. The Institute expects growth in physical silver investment with most demand expected to come from the industrial sector. The Institute expects a 3% increase in silver industrial demand which should help shore price before the end of the year.
Demand for Silver for use in the electrical and electronic sector should be the key driver of Silver prices, taking into consideration the forces of demand and supply. For instance, the white metal is becoming important in the automotive industry as the race for electric driver-less cars heats up.
In response to the growing demand, Silver output is expected to climb 2% in 2020. A number of companies have commissioned new mines even as others continue to ramp up existing projects in a bid to address the growing demand, especially in the industrial sector. Given the increased rate of production, the Silver Institute expects there to be a 15 million ounce surplus before the end of the year
Conversely, Silver prices could rise by 13%, especially on finding support above the $19 mark. In addition to increased demand for the white metal, prices should also receive a boost due to spill-over from Gold price gains. The yellow metal looks set to continue powering high in response to macroeconomic and geopolitical uncertainties on the global scene.
With Gold appearing to be expensive, given the meteoric rise in recent weeks, institutional investors could shift to Silver as it also possesses the safe-haven credentials. At current levels, the white metal appears to be trading at a discount backed by solid fundamentals.
Silver Stocks To Watch
Canada Cobalt Works Inc. (CVE: CCW) is one of the company’s well-positioned to benefit on Silver price edging higher from current levels. The Canadian company is engaged in the evaluation exploration and development of mineral deposits in Canada. The stock is already up by more than 40% in line with a spike in Silver Prices.
Hecla Mining (NYSE:HL) is another silver stock that has rediscovered itself in line with a growing demand for Silver. The stock has more than doubled in value over the past few months affirming the fact that the stock is back to strong growth after threatening penny stock status early last year.
Wheaton Precious Metals (NYSE:WPM) is another Silvers stock that continues to follow gold trajectory when it comes to price action. The stock is already up by more than 10% for the year as it continues to trade in a steep uptrend in line with bullish sentiment around Silver stocks.