Will metal prices go up or down in 2020/2021? How will the metal industry be affected by Brexit?

The metal industry has suffered greatly by the uncertainty caused due to delays during the Brexit negotiations. UK metal traders reported a major decline in the metal prices of up to 50%. This was a result of reduced consumer demand. However, there is potential for the value of metals to improve during 2021 especially due to the increased certainty following the Brexit deal. Many experts support that there will always be a demand for metals in the UK.

How did Brexit influence the Gold and Silver Market?

As already stated, many analysts argued that gold and silver prices will soar because of Brexit. This was mainly due to the fact that investors would have taken their money from the stock exchange in their effort to find a safe-haven asset. For instance, when the EUR/USD declined, many investors turned to real money such as gold and silver.

As James Butterfill, head of research and investment strategy at ETF Securities, stated before Brexit: “Brexit would be very beneficial for shorting sterling and we will probably see a big pick up in gold. In that scenario we think gold could hit $1,400 [an ounce]”.

There are three potential reasons for this:

1. Brexit
2. Republican Presidential nominee, Donald Trump
3. Federal Reserve’s interest-rate policy

The metal market usually responds positively when there are expectations that the FED would follow through on their rate hike promises, as history shows repeated patterns of gold and silver price climbing along with interest rates. Even a small rise in interest rates will negatively impact metals’ trading.

Advantages of the Metal Market

All this uncertainty can be utilised by traders to their advantage by investing in gold and silver every time that the FED Chairwoman Janet Yellen talks about raising interest rates. People should not fall for this trick though and panic about their positions as they can go ahead and buy their metals or shares at a better price.
Gold price is expected to rise to $1,500 while silver to $20 irrespective of political uncertainties such as Brexit or the FED raising rates. However, failure to do the latter will result in gold rising above $1,600 and silver above $27 by the end of the year.

It is also expected that over the next months, the gains in gold and silver will be very high, while quality mining stocks will be where the real money is made. The past has shown that mining stocks have provided leverage 4 times more than the underlying move of the metals. Some mining stocks are up 200% or more. For instance, silver stock pick is up 270%. After such a big move, many investors are hesitant to buy although mining stocks are bouncing off drastically.

Overall, it seems that whether post-Brexit realities will have a long-term impact on UK metals remains to be seen. In order to avoid any risks and fill in the gaps, traders may already be focusing their efforts on alternative, emerging markets outside of the EU.

إخلاء المسؤولية:

لا تُعد هذه المعلومات نصيحة استثمارية أو توصية بالاستثمار، وإنما تُعد تواصلاً تسويقيًا. لا تتحمل IronFX أي مسؤولية عن أي بيانات أو معلومات مقدمة من أطراف ثالثة تم الإشارة إليها أو الارتباط بها في هذا التواصل.

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Compared to other precious metals, such as gold, silver is one of the world’s most conductive metals, meaning it is highly valuable. While it is not as valuable as gold, it has a lower cost entry compared to the yellow metal.

Trading silver for a currency is known as spot metal trading, which refers to the market value, or cash price of the metal at the very moment it is traded, known as the spot price.

Most investors trade precious metals such as silver because it offers the opportunity to have a diversified portfolio. They also aim at hedging their positions, even when the markets have a downward movement.

Silver Trading – Top Tips

When trading silver markets, as with any commodity, it is important to bear in mind a few important points, in order to trade as effectively as possible.

Select a suitable strategy

It is well worth spending some time deciding on a strategy when it comes to silver trading. For example, choosing a long-term investment in silver or taking advantage of short-term price movements.

Monitor the charts

When entering the silver markets, it is important to be fully briefed on the latest market movements by determining the trend, in order to maximise profits and minimise losses.

Study the gold-silver ratio

It is worth checking the gold-silver ratio when trading silver as it could offer insight into the potential price movements of the two precious metals. The gold-silver ratio is the number of ounces of silver that can be bought for the same price as a single ounce of gold.

Factors that Influence the Price of Silver

Silver trading prices are not easily influenced or affected by political or economic events. This is because it is viewed as having an inherent value, meaning that its value is protected against times of financial stress or political instability. When compared with gold, the price of silver tends to be much more volatile, while a much higher proportion is used in industry than the yellow metal.

Supply and demand

The price of silver trading is dependent on supply and demand. In terms of supply, silver has the largest volume, compared with other precious metals. Meanwhile, the mining of silver has substantially increased over the past few years and it is often a co-product of other mined minerals, such as gold and copper.

Industrial production

Due to its wide use in industrial fabrication, in products such as conductors, switches and fuses, silver trading prices can be affected by industrial output levels in terms of production volume.

Gold prices

The price of silver tends to follow the price of gold. Although this is not a set rule or formula, there is some evidence that a price correlation exists between the two precious metals.

Dollar prices

As the world’s leading currency, the US dollar has an impact on the price of silver. The price direction of the dollar has an inverse effect on silver, meaning that the precious metal can be an appealing investment when the dollar is low.

إخلاء المسؤولية:

لا تُعد هذه المعلومات نصيحة استثمارية أو توصية بالاستثمار، وإنما تُعد تواصلاً تسويقيًا. لا تتحمل IronFX أي مسؤولية عن أي بيانات أو معلومات مقدمة من أطراف ثالثة تم الإشارة إليها أو الارتباط بها في هذا التواصل.

The post Silver Trading Overview appeared first on Complete Turnkey Introducing Brokers (IB) Solution at IronFX.

Joe Biden’s Solar Plans will Boost Silver Demand

A less well-known driver for silver, but posing significant potential for the precious metal, is its use in measures against global warming. Silver, which has enjoyed a six-year high due to growing demand as a safe haven and limited supply, may be poised for a big additional boost due to its use in solar panels.

Many analysts have underlined the potential demand for the precious metal as governments look to boost economic growth and control climate change by investing in clean-energy technologies. This has been the case with president-elect Joe Biden, who earlier this summer had outlined plans for a “carbon pollution-free power sector by 2035” which will involve the use of renewable wind, solar power and electricity storage. The movement towards renewable energy and carbon neutral sources such as sunlight means that the future demand for silver will increase, as an increasing number of solar photovoltaics are used.

With more than $50 billion of green stimulus having been approved by governments up to 2020, and with Biden’s energy plan yet to come, silver will potentially surge further. In fact, the use of silver in photovoltaics grew by 7% in 2019 and is expected to grow even further as more governments commit to use renewable energy sources to generate electricity.

Demand for silver has also been on the rise since March due to the coronavirus pandemic, which turned investors towards precious metals to hedge against economic uncertainty. Concerns about tight supply and mine-production, combined with rising industrial demand are boosting silver even further.
According to various financial analysts and investors, the wider use of solar power as outlined in Biden’s plan might potentially double silver’s price. But this will come at a later stage, if Biden’s plan gets official approval.

Fundamentals also Boost Silver

Precious metals such as gold and silver are a hedge against inflation, so if the markets are expecting disappointing data to force the Fed to take necessary action to increase inflation, then this will offer support to precious metals. Therefore, precious metals were boosted by dovish Fed, low real yields, and rising inflation expectations.

For example, on 16th December, US 10-year TIPS yields fell to -1.03% following the FOMC and driven by a further increase in inflation expectations, which continue to rise as Congress moves closer to a coronavirus stimulus deal. When real yields fall, precious metals become more attractive, when compared to treasuries.

Precious metals are also used to hedge against inflation, something which in turn has contributed to the rising interest in silver. CIBC bank has forecast that silver prices will reach $32 per ounce in 2021, before sliding to $31 per ounce in 2022 and $30 per ounce in 2023.

DISCLAIMER:

This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication

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