Tech support

Despite a 15% drop, silver could continue to benefit from the support of green technology


Silver is likely to continue to enjoy support for green tech around the world, although it has fallen more than 15% from the eight-year high recorded in February of this year.

Silver, which has fallen 4.65% since the start of this year, is currently listed at $ 25.12 an ounce. “Unprecedented investor interest” in early February saw silver surpass $ 30 a tonne before returning to its levels. The white precious metal hit a record high of $ 48 an ounce in 2011.

In India, spot prices then exceeded 73,000 per kg, while forward contracts on MCX reached 73,666 per kg. On Tuesday, spot prices prevailed at 66,980, while September contracts ended on MCX at 66,597 per kg.

Under pressure

Money has been under pressure since February due to an outbreak of the Covid pandemic and concerns about the economic recovery that may impact demand for the precious metal.

Analysts are unanimous that the current fall in silver is only short-lived and its long-term outlook is good, especially as the metal will find use in various applications including solar panels.

The money is used in mobile phones, tablets, laptops, medical devices, industrial devices and automotive applications, in addition to solar panels. It also has other uses, such as in the electrical industry.

According to the Silver Institute, the voice of the industry, the silver supply this year is expected to increase by 8%, with mining production also increasing by a similar margin to 848.5 million ounces (moz) from 784, 4 moz last year.

Preferred to gold

On the other hand, the demand for the precious metal is expected to increase by 15% this year to reach 1,033 moz, with industrial withdrawals alone estimated to be 8% more at 524 moz.

Among industrial uses, the use of photovoltaics is expected to represent 10% of total consumption at 105 moz, up 4% from last year.

The market balance was projected down 71% to 23.3 moz by the institute.

The demand for physical investment for silver this year is expected to be 26% higher than last year at 252.8 moz. Bank of America, in its note to commodities investors, said it prefers silver over gold as an investment strategy for this reason.

Inflation could be additional support for investing in silver as an asset as it continues to be a safe investment, Mohit Oberoi said, writing in Market realistic.

Safe haven investment

Silver also remains a safe haven, with a record 36,706 tons of silver physically held in London coffers at the end of June, he said, citing the London Bullion Market Association.

Heraeus Precious Metals, in its assessment of the sector, said that a surge in the prices of raw materials for photovoltaic (PV) modules has caused solar panels to rise and the high cost could weigh on the demand for silver.

The long term trend of demand for silver in PV modules is robust as the deployment of solar power increases. One factor that might now come into play when it comes to the demand for silver for PV modules is the declining percentage of use in the precious metal.

In his outlook for the precious metal last year, Goldman Sachs analyst Mikhail Sprogis said the new solar panels contained 25% less silver than the old ones, which could limit the growth of the white metal. However, its use will not be eliminated.

Price forecast

The Silver Institute has forecast silver prices to average $ 27.30 per ounce from $ 20.55 last year. U.S. multinational investment bank JP Morgan has forecast an average of $ 26.5 for silver, while another Bank of America sees the metal averaging $ 29.28 an ounce.

Earlier this year, an investor talk about “The World’s Biggest Short Squeeze” on Reddit’s Wall Street Bets group saw Blackrock iShares Silver Trust record an inflow of $ 944 million on January 29. The #silversqueeze followed a run on stocks like Gamestop, Blackberry, and AMC Entertainment on the Robinhood app.

Money surged as investors alleged the “big banks” were artificially suppressing the price of the precious metal.

Balance of money supply and demand

2019

2020

2021 *

Mine exit

833.2

784.4

848.5

Total supply

1018.7

976.2

1056.3

Photovoltaic demand

98.7

101.0

105.0

Investment levy

185.7

200.5

252.8

Total demand

995.4

896.1

1,033.0

Market equilibrium

23.3

80.1

23.3

Figures in millions of ounces * Forecast

Source: Silver Institute


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