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Following its recent sharp correction, economists at TD Securities expect silver to outperform gold and reach the $30 level next year.

Key quotes

“Silver tends to do well when there is a favorable environment for gold. As such, it should respond positively to the same favourable macroeconomic, monetary conditions and fiscal drivers as does the yellow metal. Since silver has a historical volatility roughly double that of gold, based on historic norms it should outperform gold, when the yellow metal once again follows an upward price trajectory.” 

“In 2021, silver is likely to capitalize on the post-COVID industrial recovery as over 60% of silver demand comes from industrial sources. Expenditures on green energy infrastructure, decarbonization, and electrification should all help silver as it is very much used in solar panels and virtually all electrical circuits. The intensity of silver use in the general economy is set to be sharply higher over the next decade, starting in 2021.”

“With industrial demand recovering this year and investment demand remaining steadfast, the silver market is set to continue to tighten. In no small way, this will occur due to continued supply-side challenges such as second COVID-19 wave-driven closures in Latin America, Mexico and other locations. In addition, more than half of mined silver supply is a by-product of zinc, lead and copper mining, making it tough for miners to meet the surging excess proportional demand for silver.”

“Given supply is constrained and considering our improved demand projections, there will be pressure on the existing supply which should see silver move to $30/oz next year.”