Finance

On Buying Silver During A Correction

Like gold, silver has had an incredible year. It reached $22 an ounce by the end of November 2020. It then went on to gain 26% and was trading at $27.80 on the 6th of January 2021.  That was a strong 6 week rally and this rally has to end soon. And it may be time to sell silver bullion if you have any. However, some analysts believe that the price of silver will keep climbing and advise investors to buy silver bullion and ride out the wave. 

If you look at what has happened in the first weeks of January 2021 after that impressive just to $28, you will notice that the price of silver has been dropping. It dropped by a whole 10%. People were freaked out by this, especially as it happened over a couple of days without warning. However, those who buy silver bullion as an investment, should know how volatile silver is and they should expect better days to come, especially in this current economy we are in.   

If you have been contemplating investing in silver the recent dip in the price makes this the perfect time to buy silver bullion. 

The precious metals market has been influenced a lot by the pandemic and subsequent economy, and by politics. The price of these precious metals is further influenced by “supply and demand”. The demand for silver is expected to rise with the rise in the number of products from different sectors that require silver.

Politics have been a big driving force. As we transitioned from one year to another, the precious metal market had to assess its pricing on account of the Brexit deal being finalised and Joe Biden winning the U.S presidential elections against Donald Trump. 

When these two elements (the bad economy and U.S presidential race) became solidified, silver dealers and traders moved to sell. 

What’s going to happen to silver? To answer that question there are a few things we need to address first. 

President Joe Biden has already said that the $900 billion relief stimulus is not enough, so people are expecting him to offer more. He has promised a stimulus package that will cost trillions of dollars. In fact, the US Dollar has been losing value since December 2020. The trend is expected to change with this new US administration.

Silver in relation to the U.S dollar

A lot of countries haven having problems with the US being the de-facto currency they have pegged their own respective currencies. 

The U.S dollar recently rebounded by gaining 130 basis points. Which is one headwind for silver making it more expensive. 

Trump conceding to the election results and Biden being inaugurated as the next president of the United States of America helped calm tensions. Investors watching from all over the world suddenly felt comfortable. However, if Biden goes ahead with his trillion dollar stimulus package the more dollar will have to be printed. However, trillions of dollars, created out of nothing will force investors to look for alternatives, But printing trillions more will force investors to seek alternatives. If silver does continue to fall analysts believe it would bottom out around $22.00.

When considering silver one has to look at what gold is doing on the market. Silver stocks have actually been outpacing gold stocks. This has been the case since April 2020. This suggests that silver has been going strong especially in relation to equities. It has been for months now that silver was heading to a bull market. There have been large gains coupled with volatility.  

In a bull market corrections and draw downs are to be expected. These should not be feared but embraced. So, if you want to buy silver, this is a great time to buy silver. 

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