(Kitco News) This spring’s unprecedented selloff could mark the bottom in silver for the next few years to come, which means that 2020 is looking more and more like “the best buying opportunity,” according to ABC Bullion.
“Silver investors in 2011 would have seen a 77% decline from the peak to the significant low last month at $11.50, which we think has a very high probability of being looked back on in a few years as one of the best buying opportunities not only in silver but any asset class for the next few years,” latest ABC Bullion’s precious metals commentary stated.
When determining the bottom in silver, the authors of the report, John Feeney and Bron Suchecki looked at the gold-silver ratio.
“At the very recent $11.50 low, the ratio peaked at 125:1, which is unheard of. The likelihood of silver outperforming gold is even better than the 2008 low in the market, so moving forward, silver is our pick of all precious metals for the next 24 months,” they said. “It will be very interesting to look back on this level of $11.50 and a 125:1 ratio in 12 to 24 months’ time to see we are correct in our call for the 2020 bottom in silver.”
Going forward, silver will not only be viewed more as a safe-haven metal but also see an increase in demand, Feeney and Suchecki wrote last week.
“We expect the actions of Central Banks to the COVID crisis to be inflationary in the future. We think silver could start being viewed as a monetary safe haven, like gold, and could see an influx of demand from investors looking for undervalued assets that maintain purchasing power. We are certainly seeing this demand in spades with physical silver having waiting times despite our refinery running at maximum capacity and overtime,” they said.
Aside from seeing additional demand come from new uses, such as 5G and photovoltaic related technologies, Feeney and Suchecki see COVID-19 mining shutdowns working in favor of prices.
“Silver should get some support on the supply side with Mexico’s one-month shutdown expected to reduce newly mined silver supply (Mexico produces 23% of global silver), following similar lockdowns in South Africa, Peru, Argentina and Quebec,” the authors wrote.
ABC Bullion highlighted a “high probability of silver going exponential” after marking multi-year lows in March. At the time of writing, May Comex silver was trading at $15.550, up 0.29% on the day.
The Australian firm has been bullish on silver all last year, but it is convinced that the metal’s time is coming. “Perhaps in the words of Bob Dylan ‘the slow one now, will later be fast,’ and we think there is a few key indicators that the silver market has made a very significant low that won’t be retested,” Feeney and Suchecki wrote.
Inflationary pressures, which will come after the peak of the COVID-19 crisis, will add an additional push higher for gold and silver, the report added.
“With interest rates so low, the perceived cost of the debt incurred appears low and encourages looking for any excuse to help the country (and their election chances) along. Ultimately that results in savers getting squeezed between higher inflation and central bank restricted interest rates. Such low or negative real (after inflation) interest rates is historically when gold and silver shine,” Feeney and Suchecki said.
Author: Anna Golubova