According to Bart Melek, Head of Commodity Strategy at TD Securities, considering silver’s supply/demand fundamentals over the next four years, the white metal still has enough of relative value to regain.
“When the atmosphere is good for gold, silver tends to do well. Given its historical volatility, which is nearly double that of gold, and the fact that it is directionally synced, the white metal should outperform gold through 2022.”
“The investment community and conventional silver buyers bought 531 million oz of the metal in 2020, and we expect them to buy another 885 million oz by the end of 2023. In addition to benefiting from the same monetary, FX, and macro drivers as gold, the white metal is expected to witness an increase in industrial demand of 115 million oz over the same time period.”
“Because the industrial sector accounts for more than 60% of consumption, silver should benefit from increased industrial demand as the world economy continues to recover from the Covid-induced deep global recession last year. As the microprocessor shortage, which slowed auto and other industrial production, and other logistical challenges are rectified, demand should pick up again in the second half.”
“Silver is heavily utilized in solar panels and electrical circuits, thus spending on green energy infrastructure, decarbonization, and electrification should help it rally. Starting in 2021, the intensity of silver use in the general economy is expected to increase dramatically during the next decade.”
“Given the current status of supply and the long-term strong demand prospects from investors and industrial users, we believe silver will trade at about $30/oz in the coming year. Long-term prospects could be even brighter, as demand from environmentally friendly sources and limited capital expenditure in primary and secondary silver mine capacity tighten the fundamental picture.”/n
