M6 BARRON’S February 8, 2021
Silver Prices Will Climb
Even After Squeeze Play
F
renzied trading in silver recently
lifted prices to an eight-year high.
But fundamentals already pointed
to a break out in the metal before
the latest rally, some analysts say, and
prices remain undervalued.
“Reddit-triggered buying” was a signifi-
cant event that “lit a fuse,” says Paul Mlad-
jenovic, author of “Investing in Gold and
Silver for Dummies.” The physical market
is extremely tight and demand is stronger
than usual, so there is power to the upside
for silver prices.
On Feb. 1, futures prices settled at
$29.418 an ounce, the highest finish since
February 2013. Traders attributed the
climb that began on Jan. 28 to coordinated
buying by investors gathering in social-me-
dia platforms, following a post on Reddit
which suggested executing a short squeeze
on silver.
It was really a combination of factors
that led to silver’s rise, says Frank Holmes,
chief executive officer of U.S. Global Inves-
tors. “Solar panels have been a massive
industrial demand” source, and President
Joe Biden’s climate change initiative are
bullish for silver demand, he says.
In a late January blog post, Holmes wrote
that silver would become a major benefi-
ciary of emerging industrial applications,
including an increase in solar power genera-
tion and the global rollout of 5G technology,
which will boost the need for the metal.
Silver’s physical market was already
stressed, with major world manufacturers
and mines encountering more demand for
certain fabricated bars and coins “than
their ability to produce product since the
Jan. 6 storming of the U.S. Congress.” That
episode created a demand surge for gold
and silver, says Dana Samuelson, president
of American Gold Exchange.
The Reddit-driven surge strained sup-
plies even further, pushing premiums that
dealers charge each other higher, Samuel-
son says, as “dealers across the country
rushed to buy any immediately deliverable
production.”
“Rising investment demand could abso-
lutely increase silver prices over the long
run,” says Ryan Giannotto, director of re-
search at GraniteShares. Precious metals
had not captured the interest of young in-
vestors, but this event may have marked a
turning point.
With the “inflationary pressures of low
rates, continued stimulus and a falling dol-
lar, all precious metals are in an environ-
ment conducive for materially higher price
potential,” Giannotto says.
Samuelson believes silver remains un-
dervalued relative to gold by 10% to 30%.
With gold in the $1,825 to $1,875 an ounce
range, silver should be trading at $30 to
$35, he says.
Silver futures touched a high of $30.35
on Feb. 1, topping the $30 mark for the first
time since February 2013.
They’ve pulled back since then, and are
still a long way from the all-time settle-
ment high for most-active silver futures at
$48.599 an ounce on April 29, 2011, based
on FactSet data, according to Dow Jones
Market Data. The March silver contract
settled at $27.019 on Feb. 5.
Silver bullion prices climbed around
400% when the Hunt brothers cornered
the silver market 40 years ago, with prices
rising from $11 in September 1979 to $49.45
in January 1980, based on the London PM
Fix, according to The Silver Institute. The
institute noted that prices fell to below $11
an ounce two months later.
After those two attempts in the past to
top $50, “the third time is the charm for
silver,” says book author Mladjenovic, who
estimates the price will hit and exceed $50.
“With or without the Reddit phenom-
ena,’’ buying quality stocks and exchange-
traded funds makes sense, Mladjenovic
says. “The market is stronger now, espe-
cially with problems unfolding with infla-
tion, debt, and spending.” Triple-digit sil-
ver—$100 or more—is a possibility in the
near future, he adds.B
By Myra P. Saefong
COMMODITIES
- Place delivery holds
- Change an address
- Report an issue
- Update your payment information
- Reset your password and more
Manage Your Barron’s
Account Online
customercenter.barrons.com
Update your account details any time.
It’s quick and easy.
©202DowJones&Co.,Inc.Allrightsreserved.2E7837