The silver price has been rising considerably in the past six months. The price has for a long-time underperformed gold, but its popularity has increased again. Over six months ago, the price of XAG was below $18, and a few months later, it almost hit $30. Recently we saw the price stabilize again. In this silver price forecast, we discuss the latest silver price expectations for 2021. In this investment outlook, we will look at both the fundamental rationale and the technical signals provided by prediction charts.
The article covers the following subjects:
Silver: A Historical Overview
Silver is a precious metal used in jewelry and industry (cutlery and electronics). Investors can buy silver in standard or measured bars and coins or speculate on the spot price of silver. Although its chemical symbol is Ag, silver is known by the symbol XAG in the financial markets.
Silver price movement charts can be used as an indicator of the economy’s state, and real-time tracking of precious metal prices can sometimes help predict silver demand, the future value of silver, and price movements in several financial markets, including major commodities, currency pairs, and stocks.
Silver as an asset class has a history of thousands of years, dating back to the first recorded mining in 3000 BC. As its popularity grew, mining spread throughout the world, and the use and value of silver increased. By the end of the 19th century, 120 million troy ounces a year were being produced to meet the precious metal demand.
The silver price change began to be recorded in the 1970s when silver was introduced at a starting price of $1.80 per troy ounce. In the early 1980s, the value of silver rose to $36 but soon dropped to below $10, where it remained for more than two decades.
The silver price record high was set on January 18, 1980, at $49.45 (£21.65) per troy ounce fueled by Nelson Bunker Hunt’s cornering of the market. The silver market then peaked at a significant high during the 2008 financial crisis when the price of silver nearly doubled to $20 but fell again shortly after that. The highest price for silver since then was recorded in 2011 when it was around $50 an ounce.
Is silver going up, and where are silver prices headed? Keep on reading.
How Does the Silver Price Come About?
The spot price of silver is determined by the forward contract (future) of the month with the most volume. This is usually the contract with the closest expiration date. These futures are traded through various commodity exchanges such as CME Group’s COMEX. The value of silver is thus directly determined by traders, supply, and demand.
Commodity companies use futures to set a guaranteed price for commodities such as silver or oil. These forward contracts guarantee that they can buy or sell the underlying asset at a fixed price and on a predetermined date. Such agreements significantly reduce risk.
Silver is often seen as gold’s little brother. Therefore, the silver market is much smaller than the gold market, so price movements can be even more volatile. Silver has a higher beta than gold. That means that the silver price responds with higher volatility to the overall market volatility. Naturally, this effect works both upwards and downwards.
Like gold, silver offers some protection against inflation, currency risks, and stock market falls. Many traditional investors would rather not have gold and silver in their portfolio as it does not pay off. The shiny metal does not give a dividend, and only price gains can provide returns.
Historically, gold and silver have a low correlation with stocks. A small percentage of commodities, including gold and silver, can therefore lower the risk of a well-diversified portfolio.
The price of silver is usually expressed in dollars worldwide. But since the introduction of the euro, the silver price is increasingly also shown in euros. The euro/dollar exchange rate has considerable fluctuations, which can also significantly influence the silver value.
The silver price is expressed in troy per ounce, and one troy ounce equals 31.1034768 grams. For example, if the silver price is at $16, you would pay $16 for a little over 31 grams of silver.
Demand for Silver
In the silver price history, the demand for this metal has been on the rise for years as industrial demand for it is increasing. For example, silver is widely used in solar panels, and the need for this is growing exponentially due to the energy transition. When made with silver, batteries can have a higher capacity, and demand for batteries also increases at an unprecedented rate. On top of the rising demand is a falling supply.
Since the coronavirus crisis, all the way through 2020, the price of silver has skyrocketed. Demand for this precious metal appears to have increased for inflationary reasons. To combat the coronavirus crisis, governments and central banks have started printing money en masse.
The money supply is overgrowing, and many investors are now afraid that this will cause inflation sooner or later. Gold and silver could enjoy higher demand in such a situation. Therefore, the hedge against inflation is the first argument for a rising silver price in the coming years.
Besides, both gold and silver still act as a safe haven. In the event of political or economic unrest, investors keep turning to precious metals. A mutated variant of the coronavirus or a financial crisis can also cause the silver price to skyrocket in the next few years.
Silver Price Today
On Forex, the silver price today is $27.276. This precious metal is extensively used in manufacturing, meaning its price is susceptible to global demand making it volatile to trade. The value is interactive, so you can refer to this article to find out what the price of silver will be later this week or next week.
Silver Price Predictions for 2021 by Experts
The table below shows the 2021 silver price prediction from various commodity and bank experts. Here’s what they think XAG will be worth in 2021, on average.
|Analyst Lawrence Williams||$32.25|
|CPM Group||$28.17 on Avg|
|Metals Focus||Well above $30|
|Bank of America||Above $31|
|BNP Paribas||$23.50 on Avg|
|Bloomberg Intelligence||Probably less then $50|
Next, we’ll look at a long-term silver price forecast through Technical Analysis.
Silver Technical Analysis
To conduct a technical analysis of the XAGUSD, we’ll examine the market situation on the oldest time frames. We’ll determine general market development trends and the key levels that may seriously impact the silver’s price movements.
As the silver price chart shows, there was a powerful impulse in the second half of 2020 after a 7-year flat period. That impulse may give rise to a new bullish trend.
Local minimums and maximums grow together with buyers’ activity. That points to the current trend’s high potential and an eventual further uptrend.
The local trend is consolidating at the moment. A powerful support level at 28.12 USD (marked with the red line) limits silver quotes‘ downward movement. It served as a resistance level many times in March 2008 and July 2016 and then turned into a powerful support level after a breakout in July 2020. A successful price retest from above proves that.
The nearest resistance level was formed in August 2020 at the last local maximum at around 30 USD. The corresponding green candlestick formed amid a high trading activity (blue circle). When the future price has overcome that level, we’ll have a clear signal of a further uptrend.
XAGUSD price prediction for next three months
To make a realistic forecast for the next three months, let’s do a technical analysis of the XAGUSD weekly price chart.
The silver to USD chart shows that a correction started in August 2020 in the form of a triangle marked with purple lines on the print screen above. Based on growth prospects, we can consider it to be consolidation before the continuation of a bullish trend.
A breakout of the resistance level on the RSI chart (blue line) may be one of the confirmation signals.
At the same time, the price is unlikely to break the triangle’s upper limit at 30 USD because of significantly lower trading activity. So, silver’s projected trading range will go from 25 to 30 USD or even further.
What will be the price of silver in 2021?
To make a forecast for silver’s price in 2021, we’ll analyze the XAG/USD’ price history and predict this year’s market situation.
Using Bollinger Bands, I projected silver’s expected values for each month.
Silver quotes’ high bullish potential will break the triangle’s upper edge sooner or later, and the chart will then continue to go up again.
Silver’s price may be expected to start growing in autumn, and the trading activity will increase too, just like it was with the previous bullish waves. So, the conclusion is that the XAG/USD pair will most likely have grown to the price target of 35 USD by the end of the year.
For your convenience, I marked the expected trading range for each month in the table below:
Silver Prices Forecast 2022
Below is a silver price prediction chart for 2022. Please remember that long-term forecasts for all asset classes are very approximate and are subject to change at any time.
Silver Prices Forecast 2023
Next, we have listed a silver price prediction chart for 2023. Even more so for 2023, please keep in mind that long-term forecasts are often unreliable and are created to form an approximate idea of how the value of an asset class may perform in the future.
Long Term Silver Price Prediction 2025-2030
Any long-term forecast for the next 10 years – even for the next 5 years for such an asset as silver or any other precious metal – is too unreliable to include in our predictions. This would be pure speculation. Because it’s so hard to predict, we will not provide prediction charts beyond 2025. Too many factors may affect the rate of silver and the silver price projection, and it’s best to be up-to-date with what’s happening in the global arena in order to make realistic and reliable predictions. In the next section of our article, we have described in detail what factors may affect the price of silver.
Factors That May Affect the Silver Price
The main factors affecting the price of silver are supply and demand, the global economy, and the gold/silver ratio.
Here is the list of factors which affecting silver price:
- Consumption demand
- Protection against volatility
- Silver and inflation
- Silver and interest rates
- Good monsoon
- Correlation with other asset classes
- Geo political factors
- Weakening dollar
- Future Silver demand
Supply and Demand
As with all other commodities, supply and demand have a significant impact on the price of silver. An average of 27,000 tons of silver is mined in the world annually. China, Mexico, and Peru occupy the leading positions in terms of production. The demand of such large importing countries as the USA, Great Britain, and India can be up to 29,000 tons of silver per year. Any anticipated increase, decrease, or imbalance could cause changes in the silver market forecast.
Much of the demand for silver is driven by the growing industrial use of silver. Silver has the highest electrical conductivity of any metal and has therefore become a key component in the manufacture of devices such as solar panels. The precious metal is also widely used in medicine.
The global economy also affects the price of silver. During periods of economic prosperity, silver prices can rise as people buy more electronics, jewelry, and cars that have silver components. During times of economic and political crises (covered in the news), silver prices also rise, as silver is used as a “cheaper” security asset.
The ratio between the prices of gold and silver shows how many ounces of silver are needed to buy one ounce of gold. In mid-2019, the gold to silver ratio was 90 pips, which means that you will need 90 ounces of silver to buy one ounce of gold. This indicates that silver was undervalued. When the ratio is high, investors generally prefer silver because it is cheap compared to gold. At a lower ratio, gold is more often preferred, and as the ratio decreases, the common solution is to sell silver and buy gold.
Silver and USD
Silver and the US dollar have an inverse relationship. This is due to the fact that the weakening dollar makes silver more affordable for other countries to buy, which often leads to an increase in XAG quotes. A strong dollar makes silver more expensive, which means that the metal will see a price fall.
The inverse relationship between silver and the US dollar makes silver a popular hedge against inflation – as paper money prices decline, investing in silver can protect against these losses as the precious metal retains its value. However, it also means that a strong US dollar could put downward pressure on the price of silver. We can’t be sure what will happen in the next 5 years, but we can see what happened in the past. Below you’ll see how the XAGUSD rate changed over the past 5 years:
What Is the Future of Silver? Is Silver a Good Investment?
Will silver keep going up? The metal’s future price seems to be stabilizing again after the run-on silver at the beginning of February 2021. Interest in the precious metal is still high, but there does not seem to be a so-called silver squeeze as yet. However, the silver prices outlook still looks favorable, as industrial demand for silver is also picking up and inflation is rising. As a result, many commodities are in an upward trend again. Together with the return of investors to the silver market, this could further support the price of the precious metal.
According to the Silver Institute, the silver outlook looks bright at the moment. They expect a further price increase to $30 per troy ounce, perhaps much more than the price at the time of writing. This price increase is not only related to an increase in industrial demand but also to continued interest in silver as a safe haven.
According to research firm Metals Focus, when the price of silver falls, investors easily get into ETFs, while they are much less likely to sell their position to make a profit. More and more investors are looking at the long-term forecast and are buying for the longer term and are therefore holding their position. Especially now that savings no longer generate interest, the precious metal seems a very attractive alternative.
Make sure to create a free demo account on LiteForex! On LiteForex, you will be up to date on interesting updates about silver as an investment asset, and the user-friendly interface will come in handy if you decide to start trading silver or other commodities.
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Price chart of XAGUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.