Outlook 2021: Supply/Demand Fundamentals For Precious Metals

The supply and demand fundamentals for precious metals markets got thrown into disarray this year, leading to heightened volatility – first on the downside, then on the upside.

Although gold and silver will finish 2020 below their highs for the year, gold is still headed for an annual return of close to 25%; silver around 45%.

Can hard assets investors look forward to further price appreciation in 2021?

Yes, but…there are some near-term risks to the favorable long-term supply/demand outlook.

Assuming economic conditions begin normalizing next year, we would expect demand – especially from industrial users – to increase. Mine production would likely rebound as well.

The mining industry, like many others, faced unprecedented operational challenges in 2020 due to COVID disruptions. Many mines around the world were forced to scale back or suspend production in the first half of the year.

Supply & DemandBy the third quarter, mining output among major producers began to ramp back up. Overall, though, the top 20 gold miners will finish 2020 with an estimated 5% drop in output.

The mining industry is issuing optimistic guidance for 2021. Whether it fully recovers to pre-COVID numbers remains to be seen.

While mine supply is likely to increase versus 2020, so is consumer demand for refined precious metals products such as jewelry. Investment demand for bullion will, as usual, be a wild card that could move the market at the margins.

A related wild card is the coronavirus. Epidemiologists hope something close to herd immunity can be reached via mass vaccinations. But the virus remains unpredictable and could mutate into multiple new strains.

Virus risks, political risks, and inflation risks emanating from the Federal Reserve’s unrestrained printing press are all potential catalysts for safe-haven investment buying of precious metals.

Silver Made a Historic Low in 2020… Will It Make a New Record in 2021?

A massive surge of investment demand hit the bullion market this spring as panic gripped Wall Street and bargain hunters came out in droves.

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Disclaimer: Money Metals Exchange and its staff do not act as personal investment advisors. Nor do we advise about or advocate the purchase or sale of any regulated security, listed on any ...

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