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May
26
2021

Green energy revolution to drive silver prices and outperform gold
Neils Christensen

The silver market remains the precious metal to watch in 2021 as it will be a critical metal in the green energy revolution, according to one Canadian Bank.

In a report published Wednesday, analysts at CIBC said that they are bullish on silver and silver producers as they expect to see significant growth in solar power demand as the U.S. looks to develop more green energy technology.

The analysts noted that solar power currently accounts for about 10% of global power capacity, which means the sector has plenty of room to grow. The analysts said that there is potential for solar power to double by 2025.

"The continued focus on renewable energy worldwide, as well as re-engagement and leadership from the U.S., provides a favorable backdrop for future growth in solar power," the analysts said in the report. "Historically,  silver has tended to outperform gold during bull cycles for precious metals, and we believe this solar narrative could be an important driver in both industrial and investment demand for the metal." 

The comments come as silver prices continue to hold support above $25 an ounce and modestly outperform gold. The gold-silver ratio continues on its downward trend, last trading at 68.39 points.

Although advancing technology in the solar panel sector has allowed companies to use less and less silver. Analysts at CIBC said that this trend has probably run its course. They added that it is also unlikely that other metals will be used as a substitute for silver.

"We expect additional demand from the increasing number of solar cells constructed will more than offset the more limited impact from future silver thrifting, thereby driving net growth in silver demand for PV applications of ~35Moz by 2025, to ~135Moz in total annual demand," the analysts said. "Silver has the highest electrical conductivity among all metals at standard temperatures, which means that substitutes will not be able to match the electrical output per panel."

While CIBC trimmed its silver price forecast at the start of the year, the Canadian bank remains fairly bullish on the precious metal. In a report in February, the bank said that it sees silver prices averaging the year around $29, down from the previous forecast of $32 an ounce.

The bank also sees potential for silver miners. The company's top picks are top picks for silver equities are Wheaton Precious Metals, Pan American Silver and Gatos Silver.

"Historically, silver companies have traded at a premium to gold-focused producers, as the scarcity of investable ideas to gain silver exposure drove increased valuations. We expect this premium to continue and potentially expand, especially if silver outperforms gold in the near term," the analysts said. 

 

 

 

Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @Neils_c

 

 

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