Discover the Factors Fueling Silver's Surge
Silver is capturing the attention of investors in 2024, showcasing its dual nature as both an industrial metal and precious metal. As demonstrated below, silver has boasted an impressive ascent this year, with current figures denoting a nearly 30% rise year to date and is reaching prices not seen in more than 10 years.*
This rise merits scrutinization on the factors affecting silver’s price and consideration into how those factors may play out going forward. As a precious metal, like gold, silver is used as a store of value and a hedge during uncertainty. It is often said that silver lives in the shadow of gold and thus, tends to trail gold, albeit at a lesser intensity.
In recent years, more than half of silver supply has been used for industrial purposes. 1,2 Silver had an impressive run in 2011-2012, which many believe was partly driven by industrial demand. The recent appreciation in silver prices illuminates the various dynamics influencing market sentiment such as industrial use cases, supply and demand, and economic factors. Let’s take a look at the key forces steering silver’s price trajectory and explore considerations for the road ahead.
Supply Constraints – 2024 is expected to mark the second-largest market deficit of silver in more than 20 years.1
As a natural resource attained primarily through mining operations, it takes a significant investment in time and resources as well as approvals and permits from local governments to mine silver. This situation makes it difficult to quickly increase supply.
Due to growing use cases and corresponding supply constraints, the structural deficit in the silver market is estimated to persist beyond 2024.3
Industrial Demand – Industrial usage consists of significant applications in semiconductors, solar panels, batteries, medical devices, cell-phones, and more.1
Industrial demand for silver hit another record high in 2023, rising by 11%, and is expected to continue growing. This growth was led by the electrical and electronics sector, which grew 20% to 445.1 Moz4” and overall demand for silver exceeded silver supply for the 3rd consecutive year (by 183.4 Moz).1
Silver is considered the world’s best electrical conductor, consequently, its electrical and thermal conductivity has made it difficult to substitute. Researchers are looking for alternative solutions, but the viability of substitutes is unknown.3
Given silver’s impressive conductivity and malleability, it is less surprising that industrial usage comprises more than 50% of silver demand.1,2
Another huge boon for silver demand is artificial intelligence (AI). As AI continues to ramp up, demand for semiconductors, which use silver, is expected to continue surging. Other expected AI silver use cases include transportation, nanotechnology, biotechnology, healthcare, consumer wearables, and energy.
Key Industrial Use Cases:
Economic Uncertainty – Precious metals are often considered a safe-haven during times of economic uncertainty as the value is independent of a borrower or issuer’s financial soundness. Various circumstances including geo-political conflict, changing monetary policies, or inflationary pressures, can cause volatility where traditional risk-assets may lag or currencies fluctuate unpredictably. In those situations, silver's historical role as a store of value gains prominence. A weaker dollar, caused by the Fed cutting interest rates, could also increase the appeal of silver, though that narrative has taken longer to take hold as rate cuts remain on the horizon.
Looking Forward:
Looking ahead, the outlook for silver beyond 2024 suggests a robust demand driven by its key role in industrial growth and as a time-honored precious metal. Silver stands at the crossroads of significant shifts like renewable energies and technological innovation. Forecasts indicate a market shortage in 2024, the 2nd largest in decades, due to limited supply and increased consumption, especially from sectors such as electric vehicles, cell-phones, solar power, and AI. Finally, geopolitical uncertainty and potential rate cuts could add yet another tailwind to silver prices.
These factors suggest that silver's appeal is likely to grow in the future, potentially making it more attractive to both investors and industrial users.
*Amplify data, Stat as of 6/20/2024.
1Silver Industrial Demand Rose 11 Percent to Post a New Record in 2023 | (silverinstitute.org) 04/2024
2https://www.silverinstitute.org/global-silver-demand-forecast-reach-record-1-112-billion-ounces-2022/
3 Silver to See Growing Deficit in 2024 as Supply Struggles, Carbon Credits, 04/2024
4 Moz is a million ounces.