Silver prices are stuck, but future shines bright as industrial demand grows - Bank of America
(Kitco News) - Silver prices are stuck in a wide range finding little momentum from subdued investor interest; however, commodity analysts at Bank of America expect the precious metals industrial demand to keep the market well supported.
In a report published Friday, the analysts said that demand from the solar power sector and growing importance in the auto sector will be two critical factors driving silver prices for the next three years.
The bank sees silver prices ending the year at around $32.50 an ounce as the market sees falling supply and growing industrial demand. The long-term bullish outlook comes as silver prices consolidate between $24 and $25 an ounce. May silver futures last traded at $25.81 an ounce, up 0.30% on the day.
"Demand headwinds have been gradually tailing off, and silver usage in solar panels is set to increase further as more photovoltaic (PV) is installed," the analysts said in the report. "Importantly, out to 2025, new PV installations in GW will likely outpace any savings from learning effects that might reduce silver loadings in panels. We assume 19t of silver per GW of capacity installed at the moment."
Looking beyond the solar sector, Bank of America expects electric vehicles to be an essential source of industrial demand for silver. They said that each electric car uses about 38 grams of silver, up 72% compared to conventional internal combustion engines.
"Overlaying these figures with expected EV production volumes, we believe silver usage could rise to 3,522t by 2025, from around 2,000t in the past decade," the analysts said.
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Along with growing demand, the report also noted that the silver market is seeing falling mine production.
"Silver production should remain subdued and is unlikely to return to the levels seen a decade ago. Of course, lack of output growth has been influenced by the low silver quotations in the past decade, which pushed miners to cut capex," the analysts said.