Investment Banker Goes Bullish on Silver, Could the Silver Price hit $40?

You’ve probably heard things have been quite good for gold this year. Gold spot prices in US dollars have risen by 25% since the beginning of the year.

Yet things have been pretty good for silver too. If you’ve been keeping a close eye on this metal, you know it’s been telling quite a story.

The Silver price collapsed in March hitting a 12-month low of US$11.64. Silver has gone to rally by close to 110% since March lows against the US dollar.

At time of writing, silver is trading at US$24.31 an ounce.

Investment banker bullish on silver

Now Citi is forecasting silver could keep rallying to US$40 an ounce in the next 12 months and that prices could even go higher, US$50 or even US$100 an ounce.

As Citi said, courtesy of Forbes:

The bank said it’s forecast of a rise to $40/oz over the next 12-months is based on a combination of sustained strength in investor demand and a recovery in industrial consumption during 2021.

“We expect that investor demand for precious metals exposure will remain high during 2021 as pressure on governments to devalue currencies, concerns about vaccine efficacy and take-up rates and questions over equity and bond valuations and rising global debt remain in most scenarios,” Citi said. 

The bank said its foreign exchange (FX) technical team is very bullish on silver with “$50/oz a very realistic target and $100/oz possible.”

Could silver prices go higher?

Silver is used for industrial applications such as medicine, electronics and semiconductors among others.

But silver is also considered a hedge during an economic crisis.

As I mentioned earlier, silver prices collapsed in March against the US dollar but also collapsed against gold when gold rallied.

The gold-to-silver ratio (the amount of silver ounces needed to buy one ounce of gold) hit 127 back then, as you can see below:

ASX Gold to Silver Ratio - Gold Silver Price Chart

Source: Gold Price

Silver has since closed some of that gap against gold as demand for silver increased during the pandemic.

In fact, if you tried to buy physical silver coins and bullion during the pandemic, you probably struggled to do so with the lockdowns, mint closures and backlogs.

Mexico, the largest silver producer in the world had to stop production because of the pandemic.

The gold-to-silver ratio is now sitting at around 78, higher than the average.

Silver demand as a hedge could still go higher even with an economic slowdown with lockdowns looking likely in Europe and in the US as they head to winter, central banks printing large amounts of money to keep their economies afloat, higher unemployment and market volatility.

Rum Rebellion’s editor Dan Denning believes that silver’s rally is far from over. In fact, now might be the best time to add the precious metal to your investment portfolio.

Click here to download his free report ‘The Role of Silver’.


Selva Freigedo

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

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