Silver’s rally is likely to continue for the rest of the decade. We could be moving into an inflationary politician-led era of universal basic income, modern monetary theory, and government-guaranteed bank loan schemes. These trends will put upward pressure on the silver price.
Silver is far and away the most heavily leveraged exchange-traded commodity. An August 2020 report by Macquarie put the ratio of derivatives to physical market at 193 for silver, compared to 86 for nickel and 74 for gold. This creates potential for a GameStop-style short squeeze on silver.
The consensus opinion of professional silver analysts is that the world will broadly go back to the way it was before 2020. They are forecasting falling investment demand and lower silver prices for 2021–25, but we think they are mistaken.
We believe the ‘go back to the way things were’ assumption will be proven wrong. The virus may have had little impact on silver sources, but it has had a profound impact on government and society.
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Silver is both a precious and industrial metal. The growth of the solar cell industry has been one of the key industrial demand drivers over the last decade and that is likely to continue even as the marginal cost compression of solar cells moderates.