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(Kitco News) – The silver market is seeing extreme price action as a crowd of retail investors have failed to create lasting tightness in the market; however, one bank continues to see potential for the precious metal.
In a report published Tuesday, Michael Widmer, precious metals analyst at Bank of America, said he remains bullish on silver, expecting prices to rise to $ 35 with the chance that prices will climb to record highs around $ 50 an ounce.
Widmer added that Monday ‘A failed rally above $ 30 an ounce is a bit of a concern for the market in the near term. However, he also said the market remains supported by strong fundamentals. His comments come because silver prices have been abandoned almost all Monday ‘s profits. March silver futures last traded at $ 26.77 an ounce, down 9% on the day.
“The speed at which prices have increased is a concern as some traditional markets, such as China, are trading at a deep discount, ”he said. “While we remain optimistic on fundamentals, this is worth following as a lack of commercial purchases ultimately means that the rally could come to an abrupt end once recent strong investor purchases weaken. “
While the silver market has seen unprecedented volatility over the past week, Widmer said the price action is not outside historic standards.
“Many of the usual market statistics have remained within the recent margins, indicating that dislocations were manageable. Retail investor trends in particular do not appear to have been significantly disruptive, ”he said in the report.
“ETFs dig a little deeper into that and have the equivalent of 84% of the metal stored in vaults linked to the London Bullion Market Association (LBMA), which is a high ratio. That said, while AUMs have risen among physically backed ETFs, many of the usual metrics, including prices / NAVs, have generally remained within the range seen in recent times. In another corner of the market, silver EFPs have also risen, but similarly, levels have remained within the known valuation classes, ”he added.
Looking at recent volatility, Widmer said he remains bullish on silver as the fundamental outlook for supply and demand supports higher prices. He noted that large stocks of silver have declined and the market is relatively balanced as miners have scaled back production in recent years.
Looking at the supply side, Widmer said he expects silver to get a significant boost this year as President Joe Biden continues his aggressive policies on climate change and the development of new green technology.
He explained that demand for solar panels has risen as the Biden government strives to cut emissions to zero by 2035.
“To achieve this, electricity generation would in all probability need to be revised, possibly also through increased investments in solar panels. In our base case scenario, we have a silver shortage this year, a shortage that would carry over under Biden ‘‘s plan,’ he said.
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