Jeff Clark, Senior Analyst, GoldSilver.com
What will the silver price do in 2021? And where is it headed over the next 5 years?
I’ve compiled silver price predictions from a number of precious metals analysts and consultancies. I also make my own prediction, based on the key factors that in my experience are most likely to influence the silver price both this year and the next five years.
This will be fun, so let’s jump in!
The table below shows the silver price prediction from various commodity and bank analysts for 2021. Here’s what they think we’ll see this year.
Most industry analysts predict the silver price will move higher this year, though five project it will remain below $30.
The average of all these analysts is in the low $32 range.
But as you can see, that range is quite wide. And that is an important consideration when predicting where the price might go… silver can be very volatile at times, the result of its small market size and that it doesn’t take much cash entering or exiting to have a big impact on the price. As such, the swings—both up and down—can be bigger than what most other assets experience, including gold. This fact has to be taken into account when looking at how high or low the price might go.
What do I think the silver price will do this year, and over the next five years? To answer that question let’s look at the…
While there are a number of variables that can impact the silver price, let’s look at those most likely to play out this year and beyond and determine if they’re likely to push the price higher or lower…
Roughly half of all silver goes toward a variety of industrial applications (and another third to jewelry). Demand from industrial users usually doesn’t fluctuate all that much, but the next four years is likely to see a substantial increase due to Biden’s “green” policies.
That’s because silver is a key component in many green technologies. Since it is most the most conductive of the metals, it is vital to making green technologies what they are. Check out just how much silver demand will grow under Biden in this article.
If industrial demand grows as I expect, the silver price is likely to increase...
RESULT: HIGHER SILVER PRICE
The factor that has the biggest impact on the silver price at any time is not industrial demand or jewelry demand. It is investment demand. Here’s the evidence…
This chart, going back to 1960, demonstrates the link between investment demand and prices. The red shaded areas show that selling from investors led to lower or weak price, while the green shaded areas show that rising demand from investors led to rising prices.
The key to this chart is that when investment demand shifts from net selling to net buying, the price has risen (and vice versa). As such…
So are investors buying or selling silver?
This chart from Nick Laird at GoldChartsRUs shows the total physical silver holdings by funds, exchanges, and storage facilities. Look what’s been happening…
Investment demand for physical metal has never been higher! Even when the vaccines came out investment demand continued to surge. Investors clearly want exposure to silver.
The Silver Institute reported that they fully expect investment demand for bullion to continue to march higher in 2021.
I can also tell you that demand for silver bullion spiked at GoldSilver last year, particularly when scares about the virus exploded, along with the stock market crash in March. Volumes went through the roof. They’ve spiked again in January.
As such, if investment demand—the biggest impact on the price— continues to rise as is projected, the silver price will increase...
RESULT: HIGHER SILVER PRICE
One thing that could depress the silver price is if the vaccines work and are widely used, pushing the economy back to some sort of normal. While industrial demand won’t subside in that scenario, investment demand could, and thus push the price down...
RESULT: LOWER SILVER PRICE
Silver would also decline if the stock market crashed or we entered a double dip recession—it has not historically done well during those events.
When looking at the price of silver over the next few years, probably the biggest catalyst is monetary dilution. When the currency is debased, it makes real assets like silver (and gold) more valuable, since they can’t be created with a few computer key strokes.
And now we have both monetary stimulus and fiscal stimulus. Monetary stimulus usually goes first to the banking system and ends up inflating asset prices. But fiscal stimulus are funds that will be injected directly into the economy and immediately spent. It’s like me giving you $100 and you deposit it in a savings account vs. spending it that day on groceries.
You probably don’t need me to say it, but the U.S. doesn’t have trillions of extra cash to spend on fiscal stimulus packages. It already can’t balance a budget. Some claim they’ll “collect” on the backend; as jobs are created and the economic grows, tax revenue will increase. But the debts and deficits are so high now they’re mathematically unpayable. And history clearly shows they will lead to inflation (higher consumer prices).
Where will they get the funds for these stimulus programs? They have to create it (digital and otherwise), which will add to the already bloated deficit.
It only takes a 6th grade education to understand that the more you create of something, the less valuable it becomes. As more and more currency units are created for these massive spending plans, the US dollar will become less and less valuable—and silver (and gold) more valuable.
In fact, monetary stimulus alone is 95 times greater than annual silver production!
Now that the Democrats control all three branches of government, currency printing is sure to continue, and fiscal spending is certain to jump. Both of these things will have a direct impact on the silver price.
As Mike Maloney has said, there is no vaccine for the coming monetary crisis. The only way he’ll be wrong about silver and gold is if they stop printing—and that won’t happen anytime soon. Austerity is completely off the radar in the world we live in right now. This is a built-in catalyst for higher silver prices.
Because of this, my most confident prediction is that over the next five years, the silver price is going to increase...
RESULT: HIGHER SILVER PRICE
There are many other potential catalysts that could impact the silver price. Frankly, there are so many possibilities that they’re hard to catalog.
What I covered here are the unique circumstances the silver market finds itself in right now, and why the upcoming bull market could be bigger than many anticipate.
Suffice it to say that whatever impacts gold is also likely to impact silver—here’s a list of those possible catalysts, in our Gold Predictions article.
Based on all these factors, here are my predictions for the silver price for both 2021 and where the silver price could be in the next 5 years.
As a result of my research, I decided to buy more silver! Here’s what I bought.
I encourage you to consider that regardless of where the price may end up over the next few years, silver represents a very compelling investment opportunity for the foreseeable future.
(Follow Jeff on Twitter @TheGoldAdvisor)
An active investor with a love of writing, Jeff Clark is a globally recognized authority on precious metals. As the son of an award-winning gold panner, with family-owned mining claims in California, Arizona, and Nevada, Jeff has deep roots in the industry. Jeff regularly speaks at precious metals conferences, serves on the board at Strategic Wealth Preservation in Grand Cayman, and provides exclusive analysis and market commentary to GoldSilver customers. Follow Jeff on Twitter @TheGoldAdvisor