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(Kitco News) – The silver market is experiencing extreme price action, as a crowd of retail investors have failed to create a sustainable market squeeze; however, a bank continues to see potential for the precious metal.
In a report published on Tuesday, Michael Widmer, a precious metals analyst at Bank of America, said he remains optimistic about silver, hoping that prices will rise to $ 35 with the chance that prices will peak around $ 50 an ounce.
Widmer added that Monday ‘The failed recovery above $ 30 an ounce is a concern for the market in the short term. However, he also said that the market remains supported by solid fundamentals. Your comments come as silver prices drop from almost every second ‘earnings s. March silver futures traded at $ 26.77 an ounce, down 9% on the day.
“The speed with which prices have risen is a concern, with some of the traditional markets like China being traded at a great discount now, ”he said. “While we remain optimistic about the fundamentals, it is worth keeping an eye on because the lack of commercial buying ultimately means that the rise may come to an abrupt end as the recent strong buy from investors weakens. “
Although the silver market saw unprecedented volatility last week, Widmer said the price action is not outside historical norms.
“Many of the usual market metrics remained within recent ranges, suggesting that the shifts were manageable. In particular, retail investor trends do not appear to have been significantly disturbing, ”he said in the report.
“Digging a little deeper, ETFs absorbed the equivalent of 84% of the metal stored in safes linked to the London Bullion Market Association (LBMA), which is a high proportion. That said, while AUMs on physically guaranteed ETFs have increased, many of the usual metrics, including prices / NAVs, have generally remained within the ranges seen recently. In another corner of the market, silver EFPs have also risen, but in the same way, levels have remained within the family rating ranges, ”he added.
Looking at the recent volatility, Widmer said he remains optimistic about silver, as the fundamental supply and demand outlook supports higher prices. He noted that the largest silver stocks have fallen and the market is relatively balanced, as mining companies have reduced production in recent years.
Looking at the supply side, Widmer said he expects silver to get a big boost this year as President Joe Biden moves forward with his aggressive policies on climate change and the development of new green technology.
He explained that the demand for solar panels has increased as the Biden administration seeks to reduce emissions to zero by 2035.
“To do this, it is very likely that electricity generation will need to be revised, possibly also through an increase in investment in solar panels. In our base case, we have silver in deficit this year, a deficit that would be transferred to Biden ‘s plan, “he said.
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