Silver prices to push towards $20 in 12 months - Bank of America
(Kitco News) - The silver market has gone through a bit of a rough patch in the last few months but the bottom could be in for the precious metal, according to one bank forecast.
It appears that Bank of America is not just bullish on gold. In a report published Wednesday the bank ’s commodity analysts said that they see silver prices pushing to $20 an ounce within the next 12 months.
“Our supply and demand model implies that silver prices below $15/oz are hard to justify,” the analyst said in their report.
May silver futures last traded at $15.40 an ounce, up 0.4% on the day.
The analysts said weak industrial silver demand, which represents roughly half of the market, is the reason why silver prices have significantly underperformed gold. Industrial demand has fallen off a cliff as the global economy faces its worst downturn since the 1930s ’ Great Depression.
Currently, Bank of America economists are expecting the global economy to contract 2.8% this year. Weak industrial demand could end up pushing silver demand to its lowest level in 2004, the commodity analysts said.
However, although the growth outlook appears dismal, the analysts said that there is some hope that manufacturing will bounce back as nations recovery from the COVID-19 pandemic.
“While the unfolding Covid-19 health emergency has had a severe impact on the global economy, we believe that weak GDP growth figures come with a caveat, which means that industrial offtake could rebound more quickly than some of the weak sectoral growth data suggests,” the analysts said. “it is worth keeping in mind that the global economy entered the government-mandated lockdown and recession relatively healthy, which, against massive fiscal stimulus, should ultimately help a rebound of activity and a stabilization of demand for the white metal.”
The analysts added that not only will government stimulus restart economic activity but it will also help silver ’s investment demand shine as a monetary metal and hedge against rising inflation.
“Monetization of debt, including the potential implications for inflation, makes hard assets like silver attractive,” the analysts said. “A rebound of economic growth, supported by fiscal stimulus and central banks, could imply that silver will ultimately take off on two engines, having crashed to earth just now.”