As a metal, silver has long been coveted for its beauty and utility. From ancient civilizations to modern technology, the white metal has helped shape the world we live in, serving as both a symbol of wealth and a crucial component in industrial processes. However, despite its importance, silver has often played second fiddle to gold in terms of appeal.
Its value, often overshadowed by the more sought-after yellow metal, has remained relatively unchanged in recent years as the global economy wilted under the strain of the pandemic. But as the saying goes, “the rising tide lifts all boats” and that may very well be true for silver as well. In a market where gold is surging to record highs, experts say silver may just be riding on its coattails, poised to take off in its own right.
Industrial Demand Expected to Continue Climbing
Unlike gold, which is primarily used for investment purposes, silver’s diverse uses as a precious metal, industrial metal, and technology component make its value more dynamic. With a higher industrial demand than gold, silver is used in everything from solar panels to jewelry to medical devices. Its conductive properties and natural antibacterial qualities make it a valuable commodity in various industries, and with the ongoing push for renewable energy, the demand for silver is expected to only increase.
The burgeoning solar-power sector is projected to drive a significant portion of this uptick, with the metal being a key component in photovoltaic cells. According to Investment manager Sprott, demand for silver by the solar photovoltaic (PV) panel industry will surge by nearly 170% by the year 2030. Based on current trend projections this increase would translate to approximately 273 million ounces, accounting for about one-fifth of the total demand for silver.
While solar energy currently represents a modest fraction of the overall demand for silver, a closer look at historical data shows a clear upward trend. According to the Silver Institute, silver demand from photovoltaic cells has grown from about 5% in 2014 to 14% today. And with China’s ambitious renewable energy goals and the increasing use of solar power in other countries, the 20% demand projection for 2030 may even be conservative.
The global push towards sustainable energy, underscored by the Paris Agreement, has made silver an indispensable metal in the race for clean energy sources. Beyond solar panels, the white metal is also used in batteries for electric cars, another growing market showing no signs of slowing down. Nearly 14 million new electric vehicles were registered in 2023, bringing the global total to 40 million. This represents a 35% increase over 2022, showcasing a growth rate more than six times what it was just five years ago. As countries strive to reduce their carbon footprint, experts expect the demand for electric vehicles to continue surging, and with it, the demand for silver.
“Industrial demand is soaring, driven by photovoltaic and other electrification end uses, while supply is flat to declining,” said Mitchell J. Krebs, CEO of Coeur Mining.
While the demand for silver continues to rise, the supply of this precious metal is struggling to keep up. According to a report by The Silver Institute, global mine production of silver is expected to marginally decrease by 0.8% in 2024, while industrial demand is set to surge by 9% to reach a new high. This imbalance between supply and demand is expected to push the price of silver higher in the coming years, making it an attractive option for those looking to profit from the clean energy movement.
De-dollarization, Inflation, and the Role of Silver
Apart from its growing demand in the clean energy sector, silver has also caught the attention of investors as a potential hedge against inflation and de-dollarization. Famed investor Robert Kiyosaki, author of the best-selling book “Rich Dad Poor Dad,” recently shared his thoughts on the de-dollarization trend and the role silver could play in protecting wealth.
“Watching and listening to rumors of what will happen when BRICS nations, Brazil, Russia, India, China, South Africa produce BRICS crypto, possibly backed by gold,” said Kiyosaki in a tweet. “If BRICS gold crypto happens trillions in fake money, fiat US dollars will come rushing back to home to America causing hyperinflation in America, ultimately destroying US dollar.”
Kiyosaki, known for his advocacy of investing in hard assets, believes that the current global monetary system is at risk of collapse due to the excessive printing of fiat currencies and the growing trend of dedollarization. The BRICS nations have both the means and the motivation to reduce their reliance on the US dollar, and with the threat of continued sanctions and trade wars, the call for de-dollarization is growing stronger.
Although there is no confirmed launch date for the proposed BRICS currency, discussions and preparations are already underway. At the 14th BRICS Summit in 2022, Russian President Vladimir Putin mentioned plans for a “new global reserve currency” and expressed openness to collaboration with equitable partners. Adding to this, in April 2023, Brazilian President Luiz Inacio Lula da Silva publicly endorsed the concept of a BRICS-specific currency to facilitate trade among the member nations.
Given these developments, it’s not far-fetched to imagine a future where a BRICS reserve currency becomes a reality and changes the global monetary landscape. This, in turn, could lead to a loss of confidence in the US dollar and a shift towards a more diverse and decentralized system. In light of these potential changes, Kiyosaki has urged his followers to “protect yourself from the crash of the US dollar” by diversifying with assets like gold and silver.
With the de-dollarization trend gaining momentum and central banks looking for alternative reserves, experts like Kiyosaki see silver as one of the few assets that could retain its value in the face of a potential currency crisis. History has shown that all fiat currencies eventually fail. Whether through hyperinflation or government intervention, paper money has always faltered – and to some market observers, the US dollar’s days of dominance may be numbered.
Riding the Coattails of Gold
As the US dollar continues to lose its footing as the global reserve currency, many are turning to traditional safe-haven assets like gold to help stabilize their savings. Gold prices have broken record highs in recent months, bringing renewed interest to not just gold, but also its often-overlooked counterpart: silver.
Historically, silver has been seen as a close companion to gold. With a strong positive correlation, silver tends to mirror gold’s movements, often amplifying its gains and losses. But while gold has enjoyed months of record highs and surging demand, silver has lagged behind for many months. The gold-silver ratio, a critical metric for assessing the relative value of these metals, suggests silver is undervalued and could be poised for a significant rally. Historically, the ratio has averaged around 65:1; however, as of May 2024, it stands above 80:1. The price disparity between gold and silver has many market experts believing that it’s only a matter of time before silver catches up with its precious metal counterpart – and recent trends appear to support this theory.
Already since the beginning of the year, silver has gained over 19%, handily outpacing the S&P 500’s 11% gain. With silver breaking through key resistance levels and setting new multi-decade highs, many analysts believe that silver could be on the cusp of a major bull market. And with silver’s relative affordability compared to gold, it offers a more accessible opportunity for those looking to diversify with time-tested precious metals.
Source: Twelve Data
An Undervalued Asset Ready for its Moment
With the backdrop of record gold prices and the potential for silver to outshine its illustrious counterpart on the horizon, market experts are spotlighting the silver sector’s robust future. A confluence of factors, including a fourth consecutive yearly global supply deficit and surging demand reaching near-record levels, has primed silver for a potential price rally that could see values doubling to heights between $35 and $50 per ounce before year’s end.
While silver may have lingered in the shadow of its more illustrious cousin, gold, in recent years, experts say its recent price surge and market factors suggest a bright future ahead. The “window is closing” as Peter Spina, president and chief executive at GoldSeek.com, stated. “The opportunity to buy ‘poor man’s gold’ is ending and from a technical perspective, we are likely to see a huge price acceleration” in silver, he added.
Silver’s moment in the sun may be just around the corner, with market factors and price action primed to potentially see the precious metal surge toward record highs. With its unique dual role in the investment and industrial sectors, combined with its affordability compared to gold, the white metal’s future looks bright.
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