Anticipated Silver Demand to Reach the Second-Highest Level on Record in 2024

Silver demand is projected to increase by 1 percent in 2024, reaching 1.2 billion ounces, the second-highest level on record, as per estimates from the Silver Institute. Industrial demand is anticipated to drive global demand, experiencing a 4 percent growth to a record 690 million ounces. The growth is fueled by continued expansion in the solar energy and automotive sectors, contributing to the highest-ever industrial demand recorded in 2023.

The global push for green energy is expected to offer sustained support to the silver market. Photovoltaic installations surpassed market expectations in 2023, and new capacity additions are predicted to reach another record high this year. Additionally, a technological breakthrough leading to the mass production of more efficient N-type solar cells, which utilize even more silver, will boost silver offtake.

A research paper from the University of New South Wales suggests that by 2027, solar manufacturers may consume over 20 percent of the current annual silver supply. By 2050, solar panel production could use 85–98 percent of the current global silver reserves. Despite potential efforts to reduce silver consumption in individual panels, overall demand is expected to rise, especially with the transition to high-efficiency technologies.

The green energy sector is likely to remain relatively recession-proof due to government commitments to funding it. The projected recovery in the consumer electronics market is expected to further bolster industrial silver demand.

The silver jewelry market is poised to set a record in 2024, with a 6 percent rise, driven by increased demand for Indian jewelry.

However, the Silver Institute expects investment demand to decline in 2024, reaching a six-year low. U.S. demand is expected to lead this decline due to surging stocks and anticipated economic growth resulting from Federal Reserve interest rate cuts.

There is a potential blind spot in the analysis, as it does not account for the impact of higher interest rates on the U.S. economy, which could lead to a financial crisis, affecting economic growth and the stock market.

On the supply side, the Silver Institute anticipates a recovery in mine output, contributing to a 3 percent increase in total supply to an eight-year high of 1.02 billion ounces. However, this will be partially offset by a decline in silver recycling.

Despite the recovery in mine output, the Silver Institute projects another market deficit in 2024, marking the fourth consecutive year of a structural market deficit. The deficit is expected to ease by 9 percent to 176 million ounces compared to 194 million ounces in 2023.

Silver's current price, ranging between $22 and $23 per ounce, is considered undervalued given the market dynamics. The gold:silver ratio, currently almost 90:1, is historically wide, suggesting potential for silver to rally. The historical average of the gold:silver ratio ranges between 40:1 and 60:1, indicating that the current spread may eventually revert to the mean.