Silver prices dropped, but analysts seem optimistic 

There has been a lot of fear in the market regarding silver. Since central banks are buying tonnes of gold every year, but no silver, investors no longer see silver as a financial asset.

Silver prices dropped as much as gold in March. It seemed like shocking proof of the white metal’s death. 

The ten year gold vs. silver chart shows the white metal has decreased and can’t seem to get up.

However, some analysts think that silver’s death is too exaggerated.

Silver is much more needed than one may think

Silver has always had higher volatility than gold. 

Last year, silver rallied around 34.5% while gold broke out, rising 21.6%. However, the yellow metal lagged on the more massive gains. At that time, there was no silver shortage or demand explosion for the metal. Silver just moved with gold – precisely as a monetary metal should. 

Even though central banks don’t care for silver, for billions of people around the globe, it is interpreted as money. Those who can’t afford gold save in silver.

Besides, there are significant investment demands for silver in rich countries. China uses a vast amount of silver in solar panels. It’s no surprise that metal experienced demand shock in March. The country’s shutdown to curb the spread of the coronavirus caused significant customers to disappear from the marketplace. However, analysts think that this will change soon. 

Is there sufficient white metal on the market?

At the same time, the metal is being undersupplied. Mexico, Peru, and other countries closed down mines. The coronavirus has already taken a significant part of this year’s silver production off the table. The reopening would take some time, even if they were allowed. New strict health rules would cause extra costs for marginal players. 

On the other hand, the global recession is going to reduce the demand and production of most industrial metals significantly. It includes copper and other base-metal mines, producing most of the world’s silver as a byproduct.

Safe-haven demand for monetary metals rose. There are expectations of reduced supply due to reduced industrial activity. 

Precisely this sort of combination sent silver into its minimum after the 2008 crash.

At this point, a weakened mine supply should do a lot to oppose decreased industrial demand. It enables silver to climb with gold even if at a higher range.