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Commodity nook: why silver costs lag behind copper positive factors however outperform gold

Many commodities have hit record highs this year, but silver value has failed to keep up – precious and industrial metal prices posted modest gains, outperforming an even smaller gold advance but pales in comparison to the copper rally.

According to Michael Cuggino, president and portfolio manager of the Permanent Portfolio Family of Funds, silver may act "more like a store of value versus an industrial good this year," many of which have risen significantly.

That is "not really surprising given the growth of the past year," he says. Silver futures
SI00,
-0.04%
rose 47% in 2020.

Still, silver "could make higher highs and higher lows in the years to come," says Cuggino, with pent-up industrial and jewelry demand likely to be expected in the next year or so.

Concerns about real or perceived inflation, lack of capacity investment in recent years, and a likely decline in the US dollar as the global economy recovers will also contribute to silver price movements, he says.

Silver hit a high of $ 30 an ounce in February this year after a Reddit post hinted at brief pressure on the metal. At $ 27.88 on Wednesday, prices
SIN21,
-0.04%
increased by more than 5% for 2021.

Silver is seen as a metal for jewelry and copper as an industrial metal, says Collin Plume, founder and CEO of Noble Gold. However, silver is the "best conductor of energy" and when the next superpower is the land to conquer energy, "silver is the most important material".

Silver will most likely cross $ 50 if the Biden government's renewable energy plan is approved, according to Plume. This increases the demand for metal and leads the market to realize deliveries. According to FactSet, prices hit an all-time high of $ 48.70 in 1980.

Silver is used in both solar panels and electric vehicles and will play a key role in the transition to 5G wireless network technology, says Ed Egilinsky, director and head of alternatives at Direxion. That would likely boost silver demand and boost prices.

Even so, silver lags behind several industrial goods gains. gold
GC00,
-0.35%

GCQ21,
-0.49%
is the even bigger latecomer among metals, up 0.3% only since Wednesday and surpassing the $ 1,900 an ounce mark for the first time since January.

Both metals underperformed because "there is so much hot money out there chasing moves," such as cryptocurrencies, says Brent Cook, economic geologist and senior advisor for the Exploration Insights newsletter.

Cryptocurrencies have been blamed in part for the decline in gold, but Plume says investors are unlikely to give up gold for crypto.

The latter is a “risky” investment that some believe could make millionaires by the time they retire, but precious metals are a “hedge to protect against volatility” in such assets, he says.

copper
HGN21,
+ 2.67%

HG00,
+ 2.67%,
Meanwhile, the value rose to a record high of $ 4.76 a pound on May 11, an increase of nearly 29% this year.

A production bottleneck was "inevitable" given the "lack of new discoveries from first stage copper deposits," says Cook, referring to discoveries of the highest quality with long-term development potential.

The demand for base metals is "strong and will continue to be," with prices trending up in the long term, "regardless of the noise the Chinese make".

The Chinese authorities have warned of “zero tolerance” for illegal activities that drive up commodity prices.

This could lead to a shift to focus on markets that need metals for industrial purposes and pave the way for "the real value of gold and silver," says Plume.

If the crackdown results in a redistribution of gold and silver, it will "show the market how many and how many industries they really need," says Plume.

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