RBC Capital Markets is a global investment bank that provides banking, finance, and capital markets services to corporations, institutional investors, asset managers, and governments worldwide. One of its study and analysis teams has increased its forecasts for silver prices by up to 16% for 2020. Its projections for 2021 are growths of 17% and 14% for 2022.
Based on this data, RBC Capital Markets predicts that silver prices will average at about $17.76 per ounce this year. Next year, the white metal prices will average over $18.75, and, in 2022, it will be $18.50. Meanwhile, the metal at the moment is trading at $22.35.
The bank attributed its higher price forecasts to a more robust rebound in global industrial production and continued strong investment demand.
RBC also forecasts physical deficits for the precious metal this year and the next, compared to previous modest surpluses.
Silver offers as good investment qualities as gold
According to the RBC report, world GDP and industrial production are likely to decline year-on-year. However, there could be a better than expected result. This is because of the recent strength in all industrial sectors in China, global central bank stimulus for support, and apparent rebounds in global PMIs.
The report maintains that silver offers many of the same investment qualities as gold, even with 50-55% of the demand coming from industrial use. This means that it is equally attractive in today’s supportive gold macro environment. In particular, physical-backed silver ETF holdings have increased +140 million ounces in the past three months. It appears to have continued to support prices in recent weeks.
On the supply side, RBC forecasts sinking silver production from primary mines in the coming years. It also sees fewer primary silver projects than gold projects that could be developed in the medium term in response to higher prices.
Higher prices could incentivize the restart of several assets that have been dormant in recent years because of the weak price environment. However, this is unlikely to have a material impact on the overall supply side. Finally, silver by-product production is likely to remain relatively robust. However, this supply is price-insensitive and unlikely to respond to stronger silver prices.
But clearly, Covid-19 has had the most significant impact on precious metals’ supply. RBC notes that pandemic disruptions have had a tremendous effect on silver versus gold globally. It happened because of the geographic distribution of primary silver production in the US.
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