Table of Contents:
The current environment of the silver market
Silver is preparing to close one of its best years in the last ten, thanks to accommodative monetary policies and an unstable geopolitical landscape. These factors are helping to make silver emerge as a potential store of value. According to Roberta Caselli, commodities expert at Global X, growing industrial demand, especially from the solar sector in China, has created a significant gap between supply and demand, expected to reach
17% in 2024.
Demand and supply: an in-depth analysis
In 2023, physical demand for silver outpaced supply, continuing a three-year trend. Industrial demand has reached record levels, supported by strong demand in the solar sector. With the prospects for growth in industrial demand and the lack of a visible expansion in supply, a fourth consecutive year of deficit in the silver market is expected. The Silver Institute has already predicted a significant gap, driven by increased industrial demand and the weakness of mining production and recycling
.
China’s role in the silver market
In recent months, silver demand in China has increased by more than 20% year-on-year, supported by the need for materials for solar, electric vehicles and electronics. In 2023 alone, Chinese industrial demand for silver grew by 44%, representing more than 40% of global industrial demand. According to BloombergNEF forecasts, the capacity of solar photovoltaic installed globally is expected to increase by 125% by 2030, with China playing a crucial role
in this growth.
The supply challenges and opportunities for investors
On the supply side, the global silver market is in deficit, with global mining production registering a decrease of 1% compared to the previous year. Mexico, one of the main producers, has seen a reduction in production due to strikes. Although surface inventories have so far prevented a significant rise in prices, they are limited and could shrink further, creating opportunities for investors. Silver, often considered the ‘second gold’, has a smaller market and an industrial use that represents about 54% of annual demand, compared to 7% for gold.
Future prospects and investment strategies
With the gold-silver ratio currently above 80, silver could prove to be a cheaper option than gold, offering attractive investment opportunities. The dual nature of silver, as a precious and industrial metal, makes it unique in its kind. It can be appreciated both in periods of economic growth, when industrial demand is expanding, and in times of high volatility, when demand for precious metals increases. In this context, direct or indirect exposure to silver could prove strategic for an investment portfolio
.
