Silver has been going gangbusters in 2021, partially due to a sudden jam up of the metal’s price in February without any logical association to supply and demand. Similar to what happened with gold bullion demands in March 2020 due to pandemic panic and markets suddenly dropping, silver has gone through the roof in an illogical manner after years of meandering at under $20 a Troy ounce.
To the layperson, the argument could be easily made that February 2021 flagged the key return of silver as a viable investment, that the “other” precious metal was finally committing to a bull run. The first spike that just happened in August 2020 might have been a fluke, but another spike came back at the end of January 2021. Now, in mid-February, the angle continues to be moving upward even at a gradual incline, and that seems to be signaling, finally, a rise in the price of silver.
Don’t Base Timing on Fads and Panic Bubbles
The recent jump of silver at the end of January came and went, but it’s important to understand where it might have come from. Reddit is an online forum that allows users to post all kinds of information in specific topic channels for similar discussion. Reddit investors by the thousands were accused of acting in coordination to pump up various investments to make institutional investors suffer on short positions and lose money. That Wall Street institution placed stock market bets that given company stocks would continue to lose money, thereby making investment profit off of that business’ struggle. The bets were so heavy, they were noticed as a vulnerability by a number of individual investors chattering away on social media forums, most notably Reddit. Known as a “viral effect” on the Internet, the actions of a few snow-balled and became the individual investment actions of many. Due to the pumping, the same Reddit investors started to make incredible gains and quick profits from the combined behavior. That, in turn, drew more individual investors which grew exponentially. The big market players with the shorts, however, suddenly found themselves in bad situations with the very stocks they expected to drop rising astronomically. The company, Game Stop (GME), was the most vivid example but not the only one. Blackberry and others were also caught up in the activity, and by February 2021 silver seemed to become the latest stock-trading battleground. The Reddit community currently denies silver was on their radar, but the instability of American stock-trading activity essentially means anyone could be making moves with the apparent vulnerability to trading manipulation.
By the first week of February 2021 silver rapidly moved up from $20 to $29.50, and for many settling into at least a 13 percent increase on silver futures as well. Whether the Reddit group or institutional traders are responsible, one thing is certain: the current 2021 rise in silver is absolutely associated with rapid speculation trading and has nothing to do with supply and demand for the precious metal. As expected, the January silver bubble came back down, and the precious metal is now back in its normal range of about $25-26 per ounce.
This would leave one to conclude that the timing for silver to sell at a peak has passed. However, if one actually charts the price behavior going on right now back to the beginning of January 10, the trend is still maintaining a low-grade increase. This is not the kind of the spike behavior that one can expect to see big price gains in a sale, but patience could pay off if the trend continues through the year to keep on a slight but upward path.
For the analyst who watches the numbers carefully, silver tends to outpace even gold. Unit to unit, silver doubles its value during a rise where gold may only have a percentage increase. Gold seems like it is worth more in gain because per unit it has a much higher price point. That big number makes the eyes water like Bitcoin is doing with the cryptocurrencies right now in the high $30,000s. But when silver rises big, it practically doubles its worth. If one takes the same amount of money invested in silver versus that invested in gold, he or she would have an increase of 904% gain in silver from 2001 to 2011, and only a 636% gain in gold in the same 10 years. Do the math; which one puts more in the bank when sold and cashed out?
However, as things go up, silver falls rapidly too, and with just as much of a loss as it has again. And that’s evident in the numbers. Silver historically also lost more in value than gold when it dropped. The bottom line for speculation then is that silver has to be handled more carefully. Short-term players can make a profit, but they can also lose their shirts too.
The same issues driving silver up in 2020 still exist. High demand for economic safety and investment diversity woke up a sleeping giant, and silver supplies have not yet matched demand. Given the slim prospects for silver supply becoming available anytime soon, many experts continue to project the only direction silver can go in is upward, at least for the rest of 2021. Coupled with the supply shortage is the continued question of what is happening with the economy moving forward and the fear that overall markets being at the top of a bubble waiting to pop. Add to the inherent economic instability risk recent changeovers in global political leadership in major powers. All of these factors are pushing for an increase in safe harbors from the spiraling of markets everyone saw in March 2020. Some still even remember the bubble of 2009 and how painful that crash was too only 11 years ago.
The Critical Answer – Timing Expectations for 2021
So, after going through all the homework above, the bottom line is, the beginning of 2021 is a good time to sell silver if people have a lot of it and bought that bullion or items back in the last decade. This would be the case for a lot of folks as there was a big silver spike in 2011 and many found themselves stuck with the metal after the prices collapsed notably. However, to the extent that people bought silver just in the last few years, the current trend would indicate patience to see if silver continues its gradual increase throughout the rest of the year. Otherwise, one might end up just breaking even or losing a margin between recycling pricing versus spot pricing, travel, and other miscellaneous costs to sell.
For those who are thinking about selling their silver now or later in the year, Gold Smart can help both. Because we operate both as a buyer as well as a consolidator, Gold Smart can easily take in new silver lots for sale, small or large, as well as provide some of the best pricing for recycled silver being sold based on current pricing positions. Whether 2021 is your time to sell your silver, or you just want more information about what’s possible, Gold Smart can help. Give us a call to set an appointment or email us today!