As the retail short-selling frenzy in U.S. stocks subsides and the price of silver retreats, institutional investors’ long-term bullish view of silver remains intact. Some traders are betting that the energy transition will boost the long-term price of silver and are building giant silver warehouses to stock up when silver prices are relatively low.
Institutional investors continue to stockpile silver?
Bloomberg reports that in an effort to stockpile silver in large quantities, Singapore-based dealer Silver Bullion is building a large vault that will increase the amount of silver stored directly to 15,000 tons from the existing 400 tons. The company will build a silver vault in a six-story warehouse near Singapore’s Changi Airport, which is expected to be completed in the first half of next year, and the vault will be able to store 15,000 tons of silver when it is finished.
Market analysts believe that although Silver Bullion currently holds only about 400 tons of silver spot under its name, the company’s proactive move to expand its storage capacity indicates that it is betting heavily that silver prices will explode in the next few years.
Silver Bullion founder Gregor Gregersen said he was so bullish on silver two or three years ago that he started looking for warehouses to stock up. The sudden spike in demand for the precious metal during last year’s epidemic confirmed his earlier thoughts.
My idea was to turn the silver vault into something truly iconic, not just dedicated to storing silver.
JM Bullion, one of the largest U.S. precious metals retailers, is building a 25,000-square-foot warehouse in Dallas in June to store silver and other precious metals.
Energy Transition to Benefit Silver in the Long Run
Institutional investors’ optimism stems from the global energy transition. Institutional investors expect increased investment in solar power, a key raw material for solar panels, to provide a lasting boost to silver demand.
This includes China, Japan and South Korea, which have all set zero-carbon targets, and the United States, which is considering reducing emissions by 50 percent or more from 2005 levels by 2030.
Some forecasts see silver outperforming gold this year, and Philip Klapwijk, managing director of Precious Metals Insights Ltd, said the market will need more space for physical silver as demand for silver grows optimistically over the next few years, driven by industrial demand such as solar, 5G and auto manufacturing.
The World Silver Institute forecasts that physical investment in silver will climb to a six-year high of 257 million ounces by the end of 2021.
In terms of silver prices, Citi sees silver prices peaking at $28-30 by the second half of the year.
There is still an oversupply
However, in terms of overall supply, silver is still oversupplied in the market.
The World Silver Association expects the silver market to remain in surplus this year (but at its lowest since 2015), even with positive factors such as solar energy driving the market. Morgan Stanley said gold prices, real yields and the U.S. dollar remain strong headwinds for silver.
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