Silver did shine rather bright last year, with its price skyrocketing over 15 per cent. During 2019, its value reached highs of $19.50 per ounce and settled at around $18 per ounce in the last trading days of December. However, things took a turn for the worse in 2020.
At the end of February, the metal’s price stood at around $19 per ounce. However, only a couple of weeks later, on March 16 2020, silver experienced the most significant daily price fall in several years, with its value shedding almost $3.50 to trade just under $12 per ounce. On Wednesday, it fell to its lowest level since early 2009 to trade at $11.63 per ounce.
Frightened by the economic turbulence, many investors now wonder: could the situation get even worse for silver prices?
In this article, we try to give an answer by taking a look at the commodity’s recent performance and checking the key drivers behind its wild fluctuations. In addition, you will find a video where our chief market strategist – David Jones – gives the latest silver price technical analysis and suggests some up-to-date trading tips.
What has happened to silver in March?
The coronavirus pandemic continues to spread across the globe at a rapid pace. And while the World Health Organisation, along with international governments, is still trying to stop the disease from getting out of control, the drop in factory activity has already happened in many countries.
Lockdowns and sweeping travel restrictions are now being implemented all over the world. Some central banks, namely the Bank of Canada and the US Federal Reserve, have already carried out two emergency rate cuts within only ten days in attempts to support the countries’ economies.
However, those measures failed to stop a virus-driven selloff, with investors quickly shifting from hard assets to cash. Amid fears that the rising COVID-19 cases could severely impact the global economy, the vast majority of financial markets, including commodities and stocks, witnessed severe selling pressure on March 16.
Brent oil prices plunged almost 10 per cent during the day. Precious metals also tumbled, with platinum dropping more than 25 per cent to hit a 17.5-year low. Gold broke its psychological $1,500 per ounce level to trade at shy $1,459 per ounce.
Silver was not an exception: it followed the downtrend with its metal peers, with its price falling below $12 per ounce. On that day, May silver futures settled at $12.250.
Meanwhile, such a steep plunge in silver to 11-year lows has awoken strong demand for the physical metal. Dana Samuelson, a president of American Gold Exchange, Inc., commented: “The fall in the underlying gold and silver prices, coupled with the potential recession due to the sharp economic downturn the coronavirus is causing, has spurred the public to buy physical precious metals at the fastest pace in ten years.”
An interesting fact to consider: the US Mint reported on March 12 that they temporarily sold out of American Silver Eagle bullion coins, adding: “Our rate of sale in just the first part of March exceeds 300 per cent of what was sold last month.”
Samuelson added: “With both the US Mint and the Royal Canadian Mint on backorder for the most popular one-ounce gold and silver coins in the North American market, dealers have scrambled to buy anything that remains available to buy, driving bids substantially higher for all physical gold, silver…coins and bars that are immediately available.”
Rhona O’Connell, INTL FCStone’s head of market analysis for EMEA and Asia regions, has also noted that silver demand has increased significantly in India. “Silver has continued to slither lower, hit by the dual adverse effects of lower gold and a debilitating economic outlook. The dramatic fall in silver to eleven-year lows has launched a rush to buy silver in India, the world’s largest silver consumer,” O’Connell commented.
Regardless of the growing demand, on Wednesday, silver prices continued to slide lower, hitting $11.84 per ounce. Moreover, the same day, the gold/silver ratio peaked at its highest level ever, soaring to 126. For reference, at the end of the last trading week, it averaged at 101.74, and during 2019 – at 86.04.
On Thursday, the commodity’s value started to wobble back and forth, with its rapid fluctuations indicating that we might finally see some stabilisation in this shiny metal. Right now, the $12 level looks to be rather supportive. For that, as long as silver can stay above this mark, there is a solid chance of some type of base forming.
At the time of writing, March 20, silver traded at $12.66 per ounce.
Silver analysis in March 2020: the technical perspective
Do you want to learn what has been recently happening to silver from a technical point of view and find out how to profit off the increased volatility? Wonder where is the price of this precious metal heading next?
Watch David Jones, chief market strategist at Capital.com, make his own silver price technical analysis and review the commodity’s most recent performance:
Always stay on top of the latest silver price analysis by subscribing to Capital.com’s YouTube channel.
Analysts suggest: what is the outlook for silver prices?
Edmund Moy, a former director of the US Mint, believes that the metal’s prices have experienced such a dramatic plunge as “institutions have dumped silver for cash to pay for margin calls and other obligations, as well as hoarding cash.” He added that such a significant increase in silver bullion demand is “just the beginning,” and is “primarily driven by individual investors who see silver as an affordable safe haven and because of the lower prices, a buying opportunity.”
Moy also prognosed that “eventually, low silver prices will catch up to limited physical supply and increased physical demand. And once the global economy begins to recover from this pandemic, silver demand from industry will recover too.”
Peter Spina, a president and CEO of GoldSeek.com and SilverSeek.com, suggests that silver futures are likely “ready to at least bounce in a significant way.” On the other hand, he is yet uncertain of what the future holds: “if there is another global market selloff, silver futures could get one more historic dump to the $10 area.”
He also added: “Much of the industrial demand news is not going to be good or great for silver for the coming weeks or months, so we need to get through this biggest contribution factor to silver. Until then, investment demand is returning and if it keeps like this for several months, and industrial demand catches up, it could really squeeze the price right back up and quickly!”
That being said, it is important to note that the entire situation is very fluid right now, with the markets acting rather unpredictably. Today, investors and traders need to be ready to make quick, yet thoughtful decisions to stay afloat during the times of economic turbulence.
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