BMO: Silver To Get Long-Term Boost From Photovoltaic Demand
(Kitco News) - A rise inphotovoltaic demand should improve silver’s supply/demand fundamental picturein the coming years, said BMO Capital Markets.
Analystsdescribed silver as a “frustrating commodity” for investors lately, withprospects for outperformance that do not yield results. In a report lateThursday, the bank said it sees the gold/silver ratio eventually falling to 60,which would mean outperformance by silver, from the current level of around 78.The ratio measures how many ounces of silver can be bought with an ounce ofgold.
“In ourview, one of the ongoing challenges for silver is the longer-term trend ofindustrial demand decline, which is in marked contrast to other major metals,”BMO said. “However, as the demand void from photography is replaced by a surgein photovoltaics over the coming years, we see a brighter future for silverfundamentals over the coming years.”
The one areain which silver demand was especially hard hit since the turn of the centurywas photography, BMO noted. With the move toward digital cameras, photographs arenow “just a memory,” BMO said. This hastaken away 180 million ounces of silver demand since 2000, equivalent to 17% ofthe current market size, the Canadian bank said.
However, asphotography-related demand fell, silver's use in electrodes forphotovoltaic (PV) cells doubled since2014, BMO said. This occurred despite ongoing thrifting of silver as technologydeveloped. PV demand fell in the first quarter of 2018, but BMO citedenergy-industry reports predicting an increase in future solar installations.BMO said it sees PV silver demand doubling to around 200 million ouncesannually by 2025.
Meanwhile,BMO said, “mine supply continues to struggle.” The bank projects a thirdstraight decline in silver-mine output in 2018, which will leave this supply10% below the peak in 2015.
“Silvercannot escape gold's hold,” BMO said. “Given the macro-driven nature ofprecious-metals investment demand, we do not think silver can decouple fromgold over the coming years. It can, however, outperform as photovoltaics becomea significant demand driver.”
By Allen SykoraFor Kitco News
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