(Kitco News) - Although market volatility has knocked silver down a peg with prices trading below $30 an ounce, a growing chorus of analysts is not ready to give up on the precious metal just yet.
Bank of America is the latest institution to weigh in on the market, seeing robust potential in the mining sector. Despite the recent selloff in silver, Michael Widmer, the bank’s precious metals strategist, expects silver prices to push to $35 an ounce within the next two years.
In the short term, many analysts note that even in the current correction, silver has managed to hold solid support at its upward-trending 50-day moving average. July silver futures last traded at $29.235 an ounce, down 0.86% on the day.
In the last couple of years, gold has been the go-to safe-haven asset as investors looked to hedge against geopolitical risks; however, Bank of America expects that now it’s silver's time to shine as it has just recently started to perform within the precious metals sector.
“Silver has underperformed gold as industrial demand has been weak. With the global economy turning a corner, the white metal should start to perform better. Additional support is also coming through as the next generation of solar panels, which are more silver-intensive, are gaining traction. All of this may then also attract more investors to the market, creating a virtuous cycle that pushes prices higher, with $30/oz within reach,” Lawson Winder, Research Analyst at BofA and the lead author of the latest silver report, said.
In this environment, Winder affirmed the bank’s buy-rating for silver equities. The bank’s two big silver picks are Pan American Silver (NYSE: PAAS) and Wheaton Precious Metals (NYSE: WPM).
“PAAS is catalyst-rich, has a solid balance sheet, and offers solid production growth with significant upside potential across various assets in the portfolio,” Winder said. “WPM has peer-leading volume growth, is exposed to top-tier jurisdictions, has a strong balance sheet, and offers insulation from industry inflationary cost pressures.”
Although silver has significant potential as an industrial metal, Winder said that for prices to take off, investment demand has to pick up.
“While prices have been maintained, we acknowledge that silver has not made a decisive push higher of late. Why not? Lackluster investor demand is one reason. We are seeing a lack of interest among assets under management at physically backed ETFs. This is also reflected in CME net non-commercial positions, trading volumes on the Shanghai Gold Exchange/Shanghai Futures Exchange, and US coin purchases. Yet, we also note encouraging signs in commercial demand, which may ultimately attract investors, reinforcing our constructive view on the metal for 2024,” Widmer said in the note.
