Describing silver as a "metal important for future technologies" (MIFT) in a new report on the outlook for commodities in 2021, Bank of America said the "current focus on decarbonisation/solar panels should support fundamentals."
"The silver market has rebalanced on production discipline and demand from new applications including solar panels," the bank stated. "If more spending on solar panels comes through, silver should rally above US$31 per oz."
The bank's analysts said the white metal will be supported by U.S. President-elect Joseph Biden Jr.'s ambitious plans for achieving net-zero emissions across the U.S. by 2050.
The research report noted that "a potential increase in photovoltaics matters particularly for silver, which is a key ingredient in solar panels" and "an accelerated de-carbonisation of the U.S. power sector alone could boost annual global silver demand from 2285 tonnes in 2020 to an average of 4272 tonnes over the next 15 years."
"Looking at the potential implications of that, market balances have averaged +1100 tonnes in the past five years (2016-19) and with limited supply increases currently in the pipeline, the potential demand additions could push silver into a sustained deficit," the report continued. "The last time this happened between 2006 and 2011, the precious metal rallied to US$50 per oz., a price level we would see within reach this time around as well."
The bank's analysts pointed out surpluses "have gradually declined, and, with the help from investor demand, the silver market has already flipped into deficit. We expect another supply shortfall in 2021."