Global Precious MMI: Global silver demand to rise in 2021

Silver lining

Gold gets most of the shine in the precious metals sector, but silver is also worth monitoring.
Recently, retail traders, seemingly influenced by the Reddit-inspired run on GameStop, took an interest to silver to start February.
The spot silver price fell to around $22.60 per ounce just after Thanksgiving. Since then, the price rose to as high as $27.66 as of Tuesday, Feb. 9.
Trading volumes surged Feb. 1. According to CME Group data, futures volume for silver reached 202,463 on Jan. 29 and jumped to 372,751 on Feb. 1.
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Global silver demand to rise

Sticking with silver, the Silver Institute forecast global silver demand will rise by 11% in 2021.
“The outlook for silver demand is bright, with the global total forecast to achieve an eight-year high in 2021 of 1.025 billion ounces, thereby recovering all losses sustained in 2020,” the Institute said Wednesday. “This reflects expected gains in the critical segments of industrial demand, physical investment, jewelry, and silverware fabrication.”
The institute also forecast physical demand to rise to a six-year high in 2021, totaling 257 million ounces.
Furthermore, the Institute noted pandemic-related economic certainty helped drive investor interest in safe-haven metals, including silver. As a result, the average silver price surged from $16.19 in 2019 to $20.52 in 2020.
By industry, silver demand for jewelry is likely to rise as economic recoveries continue. Those recoveries, of course, are contingent on successful vaccine rollouts and prevention of the spread of newer virus variants.

Powell on labor market

Monetary policy is also a major factor impacting precious metals markets. Looser monetary policy in the form of a larger money supply, for example, is generally supportive of prices for safe-haven assets like gold or silver.
On Wednesday, Federal Reserve Chairman Jerome Powell weighed in on the state of the US labor market.
“A strong labor market that is sustained for an extended period can deliver substantial economic and social benefits, including higher employment and income levels, improved and expanded job opportunities, narrower economic disparities, and healing of the entrenched damage inflicted by past recessions on individuals’ economic and personal well-being,” Powell said. “At present, we are a long way from such a labor market.”
Employment in January came in 10 million below employment levels in February 2020, Powell said, marking a larger loss than any point in the aftermath of the Great Depression.
As the economy recovers, however, the Fed will not tighten monetary policy “solely in response to a strong labor market,” he said.
“Finally, to counter the adverse economic dynamics that could ensue from declines in inflation expectations in an environment where our main policy tool is more frequently constrained, we now explicitly seek to achieve inflation that averages 2 percent over time,” Powell continued.
The Fed will continue to aim to achieve “maximum employment,” he added.
On Feb. 5, the Bureau of Labor Statistics reported the national unemployment rate fell to 6.3%. Powell, however, noted the BLS has indicated a significant number of unemployed individuals have been misclassified as employed. When correcting the misclassifications, Powell said the unemployment rate in January would rise to nearly 10%.

Sibanye-Stillwater receives responsible sourcing accreditation

Sibanye-Stillwater, the South African producer of platinum and palladium, this month reported it had received responsible sourcing accreditation from the London Platinum and Palladium Market (LPPM).
The accreditation confirms the firm’s PGM refinery complies with the LPPM’s Responsible Platinum and Palladium Guidance.
The miner — the world’s largest platinum producer — also reported production results for the quarter ending Dec. 31, 2020 and full year.
Despite pandemic-related challenges, output in the second half of 2020 improved compared with the first. The firm reported PGM output of 1.58 million 4Eoz, up 9% from the upper limit of its annual guidance for 2020.
Furthermore, PGM production jumped by 40% from H1 to H2 2020.
“We continue to observe strict COVID-19 protocols at the operations as the health and safety of our employees remain our primary imperative,” CEO Neal Froneman said. “In the absence of unexpected disruptions, the Group is well positioned to deliver a much more consistent and significantly improved operating result for 2021.”

Actual metals prices and trends

As we noted earlier, the Silver Institute forecast global silver demand to rise this year. Furthermore, silver trading volumes in the US saw a significant jump to start the month. The US silver price rose 12.5% month over month to $26.98 per ounce as of Feb. 1.
The US platinum bar price moved up marginally to $1,066 per ounce. Meanwhile, the US palladium bar price fell by 3.8% to $2,160 per ounce.
The Chinese gold bullion price fell 2.3% to $60.28 per gram. The US gold bullion price fell by 2.4% to $1,848 per ounce.
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