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Silver: The 'Real Gold' In Biden’s Green World

By Investing.com (Barani Krishnan/Investing.com)CommoditiesApr 16, 2021 03:43AM ET
www.investing.com/analysis/silver-the-real-gold-in-bidens-green-world-200573411
Silver: The 'Real Gold' In Biden’s Green World
By Investing.com (Barani Krishnan/Investing.com)   |  Apr 16, 2021 03:43AM ET
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This story isn’t for the day trader looking to cash out with a 50-point move in silver based on what gold’s doing. There are charts and projections here, but they aren't exactly to help with nimble position-taking. 

No, our aim is to assist those who wish to see silver beyond the world of gold—where it reigns as the number one metal for electrical and thermal conductivity. In that world, silver is the “real gold”, enabling a green economy of solar panels that will light up and power homes and buildings, and serving as a conduit for electric vehicle batteries, just to name a few.

In Friday’s trade, the spot price of silver hit three-week highs at $26.015 an ounce after tracking a breakout in spot gold which pierced $1,770 the first time since Feb. 26. 

Silver Weekly
Silver Weekly
Chart courtesy of SK Dixit Charting

Sunil Kumar Dixit of SK Dixit Charting in Kolkata, India, said the weekly chart setup for spot silver gives a “strong bullish outlook”.

Dixit added:

“Prices are positioned on the right side of important 5-week Exponential Moving Average of $25.57 and 10-week EMA of $25.72. Middle Bollinger Band is supportive at $25.87.”

“Silver is trading above the 50% level of fibonacci retracement at $25.87, thus next the target is seen at the 61.8% Fibonacci level of $26.80, as long as 38.2% Fibonacci level at 24.80 holds with a weekly close as significant support.” 

Technically, that sounds superior. Yet on a daily basis, there’s nothing spectacular about these sort of silver moves that come in lockstep with gold. 

Discerning Investor Needs To Look Beyond Gold

What the discerning investor in silver needs to look for are the longer-term demand drivers for silver. And those are in renewable energies, including solar.

Rhona O’Connell, head of EMEA/Asia analysis at metals advisory StoneX Group, observed in a note after Thursday’s market settlement that silver’s fortunes appear wedded to gold for the immediate, foreseeable future. 

McConnell said:

“When gold is not showing a discernible trend, silver tends to revert to its industrial character, but over the past quarter it has danced largely to gold’s tune.”

That said, she noted that lively industrial activity had been developing in silver with prices at below $25.

McConnell adds: 

“A key here is electrification. Silver has the highest electrical (and thermal) conductivity of all metals and solar cells plus electric cars are driving demand, while supply remains largely price-inelastic.”

She also noted that the gold/silver ratio—a simple measure of the number of ounces of silver that are required to purchase one ounce ogold—has risen over the past quarter, as it would in a bear phase, but is now running into resistance just above 70/1. “Since mid-2020, it has been contracting as the improving industrial outlook has kept silver more resilient than gold.”

And nowhere is the industrial emphasis on silver greater than in the Green New Deal of President Joseph Biden.

Biden, Silver And The Green New Deal

Peter Krauth, an op-ed writer for bullion trader Kitco, observed in an article in December that there were "some big reasons why Biden could become silver’s best friend”.

Since his election win in November, the president has announced some of the most ambitious plans ever for the greening of America. Biden is targeting net-zero emissions by 2050 under a so-called Green New Deal. To jump start those goals, he intends to spend $1.7 trillion in federal money, and leverage an additional $5 trillion in private sector and local investment funds.

US Trade Representative Katherine Tai, addressing the World Trade Organization on Thursday, underscored the importance of the electric vehicle component to Biden’s clean energy plan.

Citing an example of her own work, Tai said she went out of her way to help resolve a trade dispute between SK Innovation and LG Energy Solutions, two US-based South Korean EV battery makers. Tai added:

“We need a strong, diversified, and resilient supply chain of electric vehicle batteries in America to meet the growing global demand and to expand US manufacturing of clean energy vehicles. This settlement puts the country in a stronger position to drive innovation and growth of clean energy technology.”

The Washington-based Silver Institute noted in a study that society had still much to learn about silver’s role in the ongoing green revolution.  

We share some of the institute’s findings to shed light on the energy makeover the world might see in the coming years, and how silver could position itself in that transition:

  • The cost of installing and providing solar photovoltaic (PV) has fallen rapidly relative to other electrical energy sources over the past two decades, even with factoring out the effects of solar subsidies and taxes/penalties on nonrenewable energy sources.
  •  
  • Solar energy uptake will grow most significantly in developing regions during the next decade, led by major policy-driven investments in domestic solar infrastructure within China and India. Solar energy uptake is expected to continue growing strongly within the United States, despite some short-term uncertainty associated with recent tariffs on solar PV imports. Within Europe, solar PV uptake is expected to decelerate through 2030, although renewable energy sources will continue to account for a growing share of regional electricity generation.
  •  
  • Although solar power will account for a growing share of global electricity generation, the amount of silver used per photovoltaic cell is expected to continue declining. Thrifting, which is widely utilized across the full metals spectrum, has already brought the average silver loadings per generated kilowatt hour down to 28.6 grams in 2017, driven mainly by continued advancements in dual printing processes, reductions in wafer thickness and finger width and, to a lesser extent, replacement of silver with other materials like copper. Silver loadings in solar PV are expected to continue declining through 2030.
  •  
  • In the transportation sector, spurred on by overwhelming policy support, as well as falling costs and greater understanding of the benefits of electric vehicles, new energy vehicles (NEVs), such as battery electric vehicles, (BEV), and plug-in hybrids (PHEVs) will account for an ever-increasing proportion of global vehicle sales. Within vehicles, silver is primarily used in electrical contacts, which connect electrical components with one another. The automotive battery market remains a commercially untapped opportunity for silver-zinc batteries. Due to cost pressures, however, current trends indicate that automakers and their suppliers will continue to invest in lithium ion technology with nominal investment in silver-bearing battery materials. The incremental growth in silver loadings within new energy vehicles will have a meaningful impact on future demand for silver from the automotive segment. 
  •  
  • The value proposition of wireless inductive charging ports and stations will increase substantially if the successful development and mainstream adoption of autonomous vehicles succeed. At the moment, inductive charging for the transportation sector is gaining traction in electric buses used by public transportation agencies, and there are signs that the next major market for this technology will be electric trucks used by regional freight companies. The adoption of inductive charging stations by the household market to provide meaningful growth in silver demand only over the long-term, as plug-in charging remains the favored technology for the current generation of EV owners.
  •  

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.

Silver: The 'Real Gold' In Biden’s Green World
 

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Silver: The 'Real Gold' In Biden’s Green World

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Comments (11)
Hiep Nguyen Quoc
Hiep Nguyen Quoc Apr 18, 2021 12:11PM ET
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Hi Mr.Barani Krishnan. Remember me? Several weeks before, I said that whatever the analysis, we bought gold just because it were cheap :))
Dave Jones
Dave Jones Apr 18, 2021 11:46AM ET
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One of the first things that got me into silver was a youtube video explaining how silver could be the first element to go extinct. Since then I've been on a wild ride down the rabbit hole. I have seen the price destroyed many times by wall street banks. The price of this beautifully rare yet fantastically useful commodity should never be determined by children in suits wanting to make money by selling silver that doesn't and cannot exist in such quantities. End the fraud. Buy physical silver.
Joe Zhang
Joe Zhang Apr 16, 2021 11:19AM ET
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manipulation?
Barani Krishnan
Barani Krishnan Apr 16, 2021 11:19AM ET
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Precious metals HAVE been manipulated for a long time.
SunilKumar Dixit
SunilKumarDixit Apr 16, 2021 11:19AM ET
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Joe Zhang. There is an organized group of big hedge funds and big banks, they have been driving the metals to their favor very often.
Dovydas Narkus
Dovydas Narkus Apr 16, 2021 11:19AM ET
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Oh yes, 50 year long manipulation
Alan West
Alan West Apr 16, 2021 11:19AM ET
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Manipulation is a goldbug fairytale.
Barani Krishnan
Barani Krishnan Apr 16, 2021 11:19AM ET
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Alan West  Nothing is more ridiculous than your theories about gold.
Santiago Alzua
Santiago Alzua Apr 16, 2021 11:05AM ET
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Ridiculous, silver use wont grow much more, there are studies on the subject and the metals that are needed, nickel and silver have much more demand, silver companies are dead and market prices reflect this
Gary Allen
Gary Allen Apr 16, 2021 11:05AM ET
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make up your mind
Gary Allen
Gary Allen Apr 16, 2021 11:05AM ET
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make up your mind
Barani Krishnan
Barani Krishnan Apr 16, 2021 11:05AM ET
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Santiago Alzua: Keep your head buried in the sand.
Barani Krishnan
Barani Krishnan Apr 16, 2021 11:05AM ET
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Gary Allen  Santiago has his head buried in the sand.
SunilKumar Dixit
SunilKumarDixit Apr 16, 2021 11:05AM ET
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Santiago Alzua. Which planet do you come from...? The times ahead are far brighter for Silver and its industrial usage across various sectors including but not limited to electric vehicles, solar power, batteries etc. Amidst limited supply, ever growing demand will only push the metal price up. Yes for the few who have their mind where the Sun never shines, it may be ridiculous.
andrru mallaiah
andrru mallaiah Apr 16, 2021 9:43AM ET
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A good article on silver..right information
Barani Krishnan
Barani Krishnan Apr 16, 2021 9:43AM ET
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Thank you in seeing the point here.
Mohammad Atif
Mohammad Atif Apr 16, 2021 9:25AM ET
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why not published article when silver at $23,$24?
Barani Krishnan
Barani Krishnan Apr 16, 2021 9:25AM ET
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There were lots of good articles on silver published even when it was trading at $20. Question is whether you were reading.
SunilKumar Dixit
SunilKumarDixit Apr 16, 2021 9:25AM ET
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Mohammd Atif. I can understand your concerns. However if you go through the articles on Silver, the author has been regularly presenting market outlook with precision. Spare few minutes on previous stories, you will like it.
Notvery Goodathis
Peteymcletey Apr 16, 2021 9:24AM ET
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Silver moves when JPM or China decide it will.
Barani Krishnan
Barani Krishnan Apr 16, 2021 9:24AM ET
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For now, of course; I can't disagree with that, at least where JPM is concerned.
Adi Karyawan
Adi Karyawan Apr 16, 2021 9:22AM ET
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Give me advice, it's time to buy or sell
Barani Krishnan
Barani Krishnan Apr 16, 2021 9:22AM ET
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Read the first two paragraphs of the story. If you haven't understood what's there, then I have nothing further to say.
SunilKumar Dixit
SunilKumarDixit Apr 16, 2021 9:22AM ET
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Adi Karyawan. If you can buy for a bigger horizon and withstand crazy volatility as Silver always does, you can buy with a staggered strategy for long term.
John Raymond
John Raymond Apr 16, 2021 5:34AM ET
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that totally depends on this spend being about genuine infrastructure. Current evidence is pointing to anything but that
Barani Krishnan
Barani Krishnan Apr 16, 2021 5:34AM ET
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If viewed from a political lens, that's how it would seem.
kamele mokotjomela
kamele mokotjomela Apr 16, 2021 4:54AM ET
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silver will be high
Barani Krishnan
Barani Krishnan Apr 16, 2021 4:54AM ET
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Over time, yes.
Ashish Mehta
Ashish Mehta Apr 16, 2021 4:43AM ET
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sir thanksis it possible if We sell1 kg silver and we buy 20 gms gold?please reply.
Barani Krishnan
Barani Krishnan Apr 16, 2021 4:43AM ET
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Your broker might be best to advise.
SunilKumar Dixit
SunilKumarDixit Apr 16, 2021 4:43AM ET
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Ashish Mehta. The inter commodity hedge you want, is best timed when price divergence is supported with volume alignment as also with some other pointers.
 
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