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Silver Market Could Still Hit $21 An Ounce - Sprott Asset Management

Kitco News

(Kitco News) - Although silver has struggled to gain momentum so far this year, one major precious metals firm is not giving up on the metal as it sees growth potential coming from industrial demand.

In a report released Tuesday, Maria Smirnova, a senior portfolio manager at Sprott Asset Management, said she remains optimistic that silver can eventually regain its luster, rising to $21 an ounce. From current prices, Smirnova’s forecast target represents a gain of 26%. July silver futures settled Wednesday’s session at $16.694 an ounce, up almost 1% on the day.

One significant factor behind Sprott’s bullish outlook is the expectation that industrial demand, as the world embraces clean energy and electrification of the auto sector, will be expected to grow.

“While silver supply stagnates, we believe demand is underpinned by synchronized global economic growth and an uptick in industrial demand,” she said. “Silver can thank the high-tech auto industry, which both reflects and is driving a global shift toward electrification powered by solar technology.”

The analyst noted that the auto sector silver demand grew 5% last year while solar power consumption increased 19%. Looking ahead, Smirnova said that auto demand is expected to grow as technology advances.

“With more technology, the more silver you’ll see in the cars, particularly in the tools that protect riders,” she said. “For example, silver is a component in operating collision avoidance systems, like cameras and sensors. If there’s suddenly a mass-market need for these automated features, then automakers will likely require more silver.”

Smirnova added that she also sees the potential for silver to rally in the near-term as there is a clear bearish sentiment in the marketplace with trade data showing a high level of short-positions. The latest trade data from the Commodity Futures Trading Commission revealed that the market had a small net-long position of 791 contracts.

“When short interests are high, there’s the possibility of short covering – short investors forced by a rising price to buy silver to cover their positions and cut their losses. This, of course, further drives the price up,” she said in her report.

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