Silver is set to outperform gold due to its sensitivity to manufacturing activity as global industrial production picks up, analysts believe.
Bank of America analysts see silver reaching $35 per ounce by 2026, up from its current spot price of $28.40. In the year-to-date, silver has added almost 20%, in line with gold’s gains.
“Positioning on silver has been more bullish due to its link to green technologies,” the bank’s analysts wrote in a research note.
“We see upside for both precious metals in the next 18 months but believe silver should outperform gold because it is more sensitive to manufacturing activity.”
As a metal important for future technologies, silver is seeing increased demand from rising electric vehicle penetration rates and solar installations.
The China Photovoltaic Industry Association has reported the growing adoption of new technologies by Chinese solar manufacturers, which analysts highlighted has implications for silver usage.
“While thrifting could slow down demand, we still expect rising silver offtake on an acceleration of solar deployment globally,” analysts wrote.
Notably, China has periodically swung to being a net importer of silver in recent months to support its fabrication needs due to changes on both the demand and supply sides.
“China’s silver consumption has strengthened on rising usage from the solar industry, while domestic silver production has slowed because the country’s smelters face tight global mine supply,” they wrote.
“The import backdrop has also improved in other countries, with both the US and Japan boosting silver purchases from abroad.”
Silver supply squeeze
Silver is in its fourth year of a market deficit, driven by a supply shortfall and increasing industrial demand, particularly in the solar energy sector.
U.S. Global Investors (NASDAQ:GROW) CEO Frank Holmes believes this market deficit spells an opportunity for inventors.
He highlighted that the deficit is expected to widen by 17% reaching 215.3 million ounces, which should boost prices.
”The ‘poor man’s gold’ is proving its worth, driven by a global supply deficit and increasing demand. Back in January, the Silver Institute forecasted that global silver demand will reach a near-record 1.2 billion ounces in 2024, up 1% from last year,” Holmes said.
Global silver mine production is expected to grow 4.1% to 916.1 million ounces in 2024 fuelled by the resumption and ramp-up of operations temporarily halted last year, according to an analysis by GlobalData.
But this is still short of the 1.2 billion ounces of demand forecast, suggesting this persistent supply-demand imbalance will continue to drive silver prices higher.
News from the field:
- Santacruz Silver Mining Ltd (TSX-V:SCZ, OTC:SZSMF) posted strong second quarter production results with significant increases in processed material and silver equivalent ounces at its Bolivian and Mexican operations. It produced a total of nearly 4.82 million silver equivalent ounces during the quarter, comprising 1.67 million ounces of silver, 25,053 tonnes of zinc, 2,908 tons of lead, and 284 tons of copper.
- Silver X Mining Corp (TSX-V:AGX, OTC:WRPSF) has stepped up production at its Nueva Recuperada property in Peru, increasing tons mined by 20% in the first quarter and 33% in Q2. Production was up 8% in the second quarter, at 362,800 ounces of silver equivalent.
- Vizsla Silver Corp. (TSX-V:VZLA, NYSE:VZLA) published a preliminary economic assessment for its Panuco silver-gold project in Mexico which showed the project has an estimated after-tax net present value (5%) of more than $1.1 billion and an after-tax internal run rate of $85.7%. The mine is projected to produce an average of 15.2 million silver-equivalent ounces per year.
- First Majestic Silver Corp. (TSX:FR) reported the discovery of a new vein-hosted gold-silver mineralized system at its Santa Elena property in Sonora, Mexico. Four drill rigs are currently focused on the area, which is open in all directions suggesting expansion potential.
- Kootenay Silver Inc (TSX-V:KTN) has kicked off a new drill program at its Columba project in Mexico. The aim of the program is to extend known vein limits and prepare for a major infill drilling campaign to delineate a maiden resource by late 2024.
- Sierra Madre announced the first shipments of silver and gold concentrates from its Guitarra Mine Complex located in Estado de Mexico, Mexico. It shipped 90.68 dry metric tons, containing 3,000 grams of silver and 30 grams of gold per dry metric ton.
- Silver North Resources (TSX-V:SNAG, OTCQB:TARSF) announced that the 2024 drilling program has commenced at the Tim silver project in Yukon, which is under option to Coeur Mining (NYSE:CDE). A total of 2,000 meters of drilling will be carried out targeting silver-lead-zinc Carbonate Replacement Deposit mineralization similar to that found at Coeur’s Silvertip Mine property, located 19 kilometers south of Tim.
- Arizona Gold & Silver Inc (TSX-V:AZS, OTCQB:AZASF) reported promising initial results from sampling of a newly uncovered historic adit and reverse circulation drilling at its Philadelphia gold-silver project in Arizona. Channel sampling in the adit indicates a likely higher-grade core in the Rising Fawn section, which requires further drilling.
- Critical Mineral Resources PLC (LSE:CMRS) has signed an exclusive option to acquire Igli, a potentially high-grade silver and copper project in Morocco. Sample grades of up to 912 grams per ton of silver and 2.97% copper have been found at Igli by the company.