Unleashing the Shimmer: Silver Market Insights
Silver Price Sluggish Increase: Examining the Reasons Behind Its Gradual Price Climb
In a fascinating dance between demand and supply, the value of silver skyrocketed from the start of the year to April 9, clocking in at a whopping $30.18 per ounce (an impressive 2.6% jump from the beginning of the year and a staggering 8.8% surge over 12 months) [1]. The celebrations, however, were premature as following Trump's tariff statement on imports, the already sparkling price soared another 9.2%, reaching an astounding $32.96 per ounce by April 16 [1]. As experts surveyed by our website rightly noted, silver, much like its golden counterpart, is often viewed as a protective investment asset yet active in numerous industrial applications [2].
While the US Geological Survey (USGS) reviewed global silver production in 2024 to be around 25,000 t (down 2% year-on-year) [3], the Silver Institute and consulting firm Metals Focus presented a contrasting scenario, projecting an annual production growth of 0.9%, to 25,496 t, primarily due to Australia, Mexico, Bolivia, and the US [4].
At the same time, global silver demand in 2024, as per the joint review, decreased by 3% from 2023, to 36,208 t [4]. Demand for silver bars and coins in major Western countries plummeted by 22%, reaching a five-year low of 5,938 t [4]. Interestingly, in 2024, despite a sharp 46% drop in demand in the US, India saw a 21% increase, thanks to a reduction in import tariffs on gold and silver from 15% to 6% [4].
Alarmingly, global industrial demand for silver boomed by 4% to reach a record level for the fourth consecutive year [4]. This trend was primarily driven by the development of energy infrastructure, production of electric vehicles, and household electronics. In fact, the Silver Institute and Metals Focus report suggested that by 2025, the global industrial demand for silver might exceed supply, creating a market deficit of 4,638 t [4].
Maxim Shaposhnikov, an independent industrial expert, sheds light on the silver deficit, attributing it to modern technology that allows for the production of more gold from gold-silver concentrate at most deposits [6]. With the active increase in gold prices and a moderate increase in silver prices, producers tend to favor gold, resulting in a silver deficit. Moreover, the recycling of waste is labor-intensive, making it a rare occasion for the silver that ends up there to ever see the light of day again [6].
Leonid Hazanov, another independent expert, cites another reason for the silver deficit. He notes that silver is significantly recovered during the processing of copper, lead, and zinc ores, and a decrease in demand for these metals can lead to a chain reaction of reduced production, followed by mining and ore processing, and ultimately, silver recovery [6].
Interestingly, analysts suggest that the silver market may experience a deficit again by 2025, as total demand is expected to decrease slightly to 35,769 t, while supply, primarily driven by increased mining, is projected to rise by 1.5% to approximately 32,000 t [7]. Consequently, the silver market is expected to remain in deficit, but this deficit could reach a four-year low of 3,658 t [7].
Silver can be seen as a defender in the tough economic battlefield, yet its price is largely determined by industrial demand. Despite the volatility in investment demand, real silver consumption has been on an upward trajectory for many years. In recent years, the global silver supply has consistently averaged 15% below demand and even shows a slight decrease [6]. Therefore, the persistent deficit in silver, bolstered by consistent industrial consumption growth, escalating investment interest in precious metals, and stagnant supply, lays the foundation for further price growth [6].
Intriguingly, the relationship between gold and silver is not always harmonious. While gold is considered a tool for capital preservation, silver takes on a more industrial role. However, an indicator called the Gold to Silver ratio (GSR) sheds light on this relationship. High values of the GSR often foreshadow periods of crisis, while low values signal economic recovery [7].
Industrial demand for silver continues to grow, but its dynamics are unable to fully explain the observed price growth. This leads experts to believe that the price dynamics are influenced more by investors than by industrialists [6].
The geopolitical landscape plays a significant role in shaping silver prices. Trade tensions between countries like the US and China can disrupt supply chains, resulting in price premiums for non-Chinese metals [5]. As geopolitical tensions, such as the ongoing Russia-Ukraine conflict, continue to influence global silver supply, price increases are expected [5].
Economic conditions also have a substantial impact on silver prices. Lower interest rates can boost demand for silver as a yieldless asset, while rising inflation rates induce greater demand as an inflation hedge [4]. Furthermore, changes in currency values—like a weakened U.S. dollar—can increase silver prices due to its safe-haven status [4].
It's an exciting time to follow the silver market as numerous factors continue to shape its trajectory. As industry experts voice their predictions, it will be fascinating to witness how the dual nature of silver as both a precious metal and an industrial commodity plays out in the months to come.
[1] Geopolitical Factors Impacting Silver Prices[2] Industrial and Investment Uses of Silver[3] Silver Mining and Recovery Rates[4] Global Silver Demand and Production[5] Economic Conditions Influencing Silver Prices[6] Determining Silver Prices: An Analysis of Factors[7] The Gold to Silver Ratio and Its Impact on the Market
- By 2025, the global industrial demand for silver might exceed supply, creating a market deficit of 4,638 t, according to the Silver Institute and Metals Focus report [4].
- In the year 2024, despite a sharp 46% drop in demand in the US, India saw a 21% increase in silver demand due to a reduction in import tariffs on gold and silver from 15% to 6% [4].
- Maxim Shaposhnikov, an independent industrial expert, attributed the silver deficit to modern technology that allows for the production of more gold from gold-silver concentrate at most deposits [6].
- Real silver consumption has been on an upward trajectory for many years, with the global supply consistently averaging 15% below demand and even showing a slight decrease [6].
- Leveraging investments in silver can attract attention from those looking for potential returns in the precious metal market, as well as those seeking protection from economic instability and inflation [2].
