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Solar Panel Demand Makes The Sun Shine On Silver

Solar Silver
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EDITOR NOTE: Silver’s dual status as a monetary and industrial metal may give it a double tailwind boost in today’s economic environment. A weaker dollar and low interest rates make silver a strong hedge against inflation while developments in alternative energy increase silver’s industrial demand. Silver prices have been rising steadily since March, outperforming gold percentage-wise, year-to-date, even with its most recent pullback. Yet silver remains the most “undervalued” of the two, and its lower prices make it more affordable, and hence more attractive, than the yellow metal. Might these two factors--monetary and industrial demand--boost silver to greater heights in the long run? We’re expecting it to do just that.

Silver has always been a wily beast for investors due to its dual precious metal/industrial metal uses, and 2021 sees silver rising on both. That contrasts with 2011, when a proper bubble in silver developed on rank speculation linked to a tumbling US dollar and the Fed’s seemingly radical monetary policy of QE2 from late 2010. QE scary? How times have changed. 

2021 brings the usual suspects that power silver higher on its hard asset/precious metal side as the US dollar weakens, and as investors are faced with the harsh reality of no relief in sight from negative real interest rates. This is exacerbated as inflation suddenly jolts higher in 2021 and policymakers are slow to respond, wanting to offer maximum support for their still-recovering economies. With a Covid-19 vaccine in rapid roll-out by the middle of the year, the excessive liquidity and over-easy policy drives a powerful bid into any hard asset.

Turbocharging the rise in the silver price in 2021, even relative to gold, is the rapidly rising demand for silver in industrial applications, especially those driving the green transformation such as photovoltaic cells used in solar panel production. In fact, a real silver supply crunch is on the cards in 2021, and it frustrates the full throttle political support for solar energy investments under a Biden presidency, the European Green Deal, and China’s 2060 carbon neutral goal, among other initiatives. 

Another challenge on the supply side for silver is that more than half of mined silver supply is a by-product of zinc, lead and copper mining, making it tough for miners to meet the surging excess proportional demand for silver. 

Trade: Long silver as the price races to an all-time high of $50 per ounce in 2021. 

Originally posted on Saxo Bank

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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