Silver’s Quiet Ascent Amid Gold’s Spotlight

In the precious metals arena, silver often trails behind gold, that much is clear. Yet, it turns out that silver has actually outperformed gold in terms of returns for investors recently. There’s a pretty strong case to be made for silver’s long-term potential, especially when you consider supply shortages and the rising demand coming from renewable technologies like solar panels.

Since October 2023, spot silver prices have been steadily climbing. They soared an impressive 163%, hitting a high of $54.38 an ounce on November 13, having started at $20.67 on October 3. However, it has since dropped a bit, closing at $51.33 an ounce recently.

Meanwhile, spot gold also witnessed a rise, increasing 142% from $1,813.90 an ounce on October 3 to a peak of $4,381.21 on October 20. Like silver, it faced a decline too, settling at around $4,163.51 on Wednesday.

While silver’s rally might not have garnered as much attention as gold’s, it has still shown a commendable performance. Historically, silver has often delivered higher returns. For example, between October 2008 and April 2011, silver increased by 431%, reaching $48.24 an ounce. Gold did rise during that timeframe as well, but only by about 168% to $1,920.30 an ounce in September 2011.

Gold tends to attract more media focus, mainly because of its historical role as a store of value, coupled with its popularity in jewelry. So when gold prices shoot up, well, naturally, the headlines follow. Recently, the optimistic trend in gold prices has been influenced by Donald Trump’s potential return to the presidency, which stirs hopes for relaxed monetary policies. Yet, there’s also a note of caution regarding US asset confidence, particularly as his administration seeks to tighten Federal Reserve controls.

The rally for gold has largely been driven by central banks and strong investor interest in gold exchange-traded funds as well as physical bars and coins. On the flip side, though, while silver tends to benefit from gold’s bullish trends, its lower price makes the physical storage less appealing for some investors.

Solar Power Surge

What really makes the case for silver more compelling is the limited increase in industrial demand alongside mining capacity. Data from LSEG shows that industrial demand for silver in 2024 is projected to rise to 689.1 million ounces, up from 644 million ounces last year. A significant chunk—243.7 million ounces—will likely be needed for solar panels, marking a sharp increase from 191.8 million ounces last year and a staggering rise from 94.4 million ounces in 2020.

Global solar capacity additions are on track to hit around 600 gigawatts in 2024 and close to 1,000 gigawatts by 2030. The International Energy Agency forecasts that about 4,000 gigawatts of new solar capacity will be installed in that timeframe, hinting that the demand for silver could spike by nearly 150 million ounces per year by 2030. This represents about 13% of the expected physical demand in 2024, which stands at 1.169 billion ounces.

While jewelry demand for silver might be affected by rising prices, the market is likely to face challenges in keeping up with total demand. LSEG anticipates a market deficit of 501.4 million ounces in 2024, a considerable jump from 19.4 million ounces in 2023. Much of the silver mined is often a byproduct of other metals like copper and lead, which adds another layer of complexity.

Ultimately, the increases in supply are heavily contingent on the broader economics surrounding those other metals, rather than solely on silver itself. With positive sentiment for copper and gold, it’s likely that silver supplies will grow in the coming years. However, expanding production at existing mines or launching new projects is a lengthy endeavor and may not happen as swiftly as hoped.

Moreover, silver supply could be constrained by the anticipated closure of mines by 2030, with industry analyses suggesting that global silver production might decrease in the future, averaging around 901 million ounces by then, down from a predicted 944 million ounces this year.