Silver's Fundamentals Strong As Electronics Sector Drives Industrial Demand - Heraeus
(Kitco News)- Although silver prices have significantly disappointingexpectations this past year, one precious metals specialist said that growingindustrial demand will continue to support the market and eventually attractinvestors.
David Holmes, senior vice president at Heraeus, said in apresentation at the London Bullion Market Association’s 2018 precious metalsconference that the silver market is facing difficult headwinds in thenear-term as the market has seen significant growth in above-ground stocks.
Holmes’ comments come as investor sentiment for physicalbullion has disappointed market expectations. The gold-silver ratio on Kitco.com remains at its lowest point in morethan 2 decades, last trading at 84.51 points. December silver futures last at14.55 an ounce, down 0.66% on the day.
However, he added that he is optimistic about the metal’slong-term fundamentals as industrial demand with the electronics’ sector isexpected to double over the next 15 years.
One potential sector that could see explosive growth forsilver is the auto market. Holmes noted that currently there is about half anounce of silver used in vehicles, but he sees that demand growing to one ounceas the electrification of the industry continues to evolve. He explained thatsensors on cars for autonomous driving and electric drivetrains all requiresilver components.
Another area of significant demand will continue to be thesolar industry. Although the sector has seen some thrifting of metals used insolar panels, the sheer growth of the industry will drive silver demand, hesaid.
In his presentation, he noted that solar currently accountsfor 2% of the world’s generated power that is expected to grow to 7% by 2030.
While there are risks to the sector from tariffs and shiftsin environmental policies, Holmes said that he sees these factors as only minorhurdles.
“Tariffs and sanctions will slow green energy growth alittle, but there is too much momentum to stall the industry completely,” hesaid. “Consumers are demanding more clean energy and that isn’t going to changeanytime soon.”
The third pillar of demand from electronics is from thesmartphone sector, said Holmes. While the developed world is reaching asaturation point for smartphones, emerging markets remains a reliable source ofdemand.
“India is now the second largest smartphone market in theworld and is expected to grow by 15.6% in 2018,” he said in his presentation.
While industrial demand looks solid, the primary driver forsilver prices remains the investment sector. Holmes said that while silverprices could continue to fall in the near-term, the market is looking a bitstretched as speculative bearish bets remain near historic levels.
“It’s not a revolution, but it is an evolution .... We canlook forward to robust physical demand with strong growth in electronicapplications leading to a positive price bias,” he said.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.  |