Analysts are raising double-digit silver forecasts

RBC Markets’ analysts have raised their silver price forecasts for 2020, 2021 and 2022 by double digits. It is now believed that an ounce of the precious metal will average $ 17.76 an ounce this year. Experts predict an average of $ 18.75 an ounce for the coming year, and should be $ 18.50 in 2022.

RBC justifies the forecast increase with a “more robust recovery in global industrial production and persistently high investment demand”. The bankers also assume that the physical silver market will develop a deficit this year and next, after smaller surpluses had previously been observed.

RBC now only expects demand for silver to decrease by 4% in 2020 after having previously assumed -17%. In addition, the ETF portfolio is now expected to increase significantly, which will lead to even greater deficits.

Analysts continue to expect global GDP and industrial production to decline year-on-year, but believe this decline could be less severe than previously thought. They base this opinion on the recent strength of the industrial sector in China, the continuing action by central banks worldwide and an apparent recovery in global purchasing manager indices.

Silver also offers many of the investment properties that also characterize gold, even if 50 to 55% of the demand came from industry. That is why silver is as attractive as gold in the current environment. This can also be seen from the fact that the stocks of silver-backed ETFs have increased by more than 140 million ounces in the past three months. And this trend seems to have continued in the past few weeks, according to RBC. That has now been included in the forecasts, it said.

Silver supply should decline

On the supply side, RBC predicts a decline in silver production from primary mines in the next few years. In addition, one sees less pure silver than gold projects, which could be developed in the medium term in response to the higher prices.

While a higher silver price could trigger the restart of several projects that have been put on hold in recent years, it is unlikely that this will have a greater impact on the overall offer. Although silver production is likely to remain relatively robust, it is unlikely that it will react to higher prices.

However, COVID19 obviously had the greatest impact on the silver supply, RBC added. The disruption of mining operations due to the corona pandemic would have had a greater global impact on silver and gold than on other areas, it said. After all, around 45% of primary silver production would come from the American continent, where more restrictive measures were taken than in other regions.

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