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The silver price could rise by 60% to $40 per troy ounce in the next twelve months. That To write analysts at Citigroup, the second-largest U.S. bank, in a new update. They expect the precious metal to benefit from more industrial demand as the economy recovers. The bank also expects that more investors will choose silver as an alternative to gold.
In a scenario in which governments further stimulate the economy, the bank foresees an increased demand for silver. Not only because it will increase industrial demand, but also because governments may make more money available for solar panels. This market accounts for nearly 100 million troy ounces annually, about ten percent of the total annual demand for silver.
Citigroup notes that silver is much more than gold responds to positive economic developments, such as new fiscal stimulus or a vaccine against the coronavirus. Analysts at the bank state that 80% of the total demand for silver is sensitive to gross domestic product. In the event of a recovery in the economy, that precious metal could therefore outperform gold.
Analysts at the bank also expect more interest in silver among investors. However, the bank warns of the higher volatility of silver compared to gold. Investors should also take into account a negative scenario in which the Silver Price drops to $20 per troy ounce. So, the bank expects minimal downside risk as the price is around $24.50 at the time of writing.
Industrial demand is an important part of the silver market (Source: Silver Institute, Metals Focus)
The bank expects investors to continue to look at precious metals with interest in 2021. This is due to currency depreciation, high debts and uncertainty about the coronavirus. The analysts write:
"We expect precious metals investment demand to remain high throughout 2021, given the pressure on governments to devalue currencies, concerns about the effectiveness of vaccines and their adoption rate, questions about equity and bond valuations, and rising global debt in most scenarios."
Silver has already risen in price by 40% in dollar terms since the beginning of this year. This means that the precious metal is outperforming gold, which is currently almost 27% higher than at the beginning of this year. However, as an investor, you have to accept the higher volatility of silver, because in March the precious metal fell sharply along with stock prices.
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This contribution was made from Geotrendlines
