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Silver is riding high but the market remains volatile

A miner inside a tunnel of the Parrilla silver mine, Mexico. Mexico is the world's biggest producer of mined silver. Reuters
A miner inside a tunnel of the Parrilla silver mine, Mexico. Mexico is the world's biggest producer of mined silver.
  • Silver market prone to fluctuation
  • Central role in energy transition
  • Impacted by other metals’ performance

With a gain in its spot price of nearly one-third since the start of the year, silver is now 2024’s best-performing precious metal. 

It is a major industrial material with an important role in the green energy transition.

Yet, while these factors are combining to give silver a moment, analysts are quick to warn of the commodity’s volatile reputation. 



“When your position in silver can go up or down 3 or 4 percent in a single day, you need nerves of steel to handle it,” Kirill Kirilenko, senior analyst and silver expert at commodities analyst CRU, tells AGBI.

On June 21 a troy ounce of silver was trading 28.4 percent higher on the spot market – where trade is for immediate delivery, in contrast to the futures market – than it was at the start of the year. (The troy ounce is used for weighing precious metals and gems, and is based on a pound of 12 ounces as opposed to 16; it is equivalent to 31.1 grams.)

That morning, the price of an ounce had fallen 1.22 percent in just three hours. The day’s prices peaked at $30.84 and ended at $29.55 – an overall fluctuation of around 4 percent.

A variety of factors lie behind this roller coaster, from supply constraints to global conflict, and economic uncertainty to technological advances.

A major tug on silver’s prices also comes from its ancient entanglement with its more valuable sister, gold.

Traditionally used for many of the same purposes, these two metals are also increasingly significant in the Gulf, where refineries and trading houses have carved out an important place for themselves in the global market. 

Mines and prospects

Mexico is the world’s number one silver miner, producing 6,400 tonnes in 2023. Second is China, then Peru, which when combined, produce roughly as much as Mexico.

Mining, however, is not the most important source of this multi-purpose metal. 

Kirilenko says that only about 30 percent of the global output of silver is actually from direct extraction from the ground. “The rest is a by-product of mining for other minerals, such as lead, copper, gold and zinc.”

This introduces a significant constraint on silver output, as production becomes tied to other metals that may be experiencing different market conditions. 

“Mining companies can’t just turn up the taps and produce more silver,” Ole Hansen, head of commodity strategy at Saxo Bank, tells AGBI. “This constraint is also not price sensitive, so a higher price may not lead to more production – or a lower price lead to less.”

Silver thus has a reputation for being “gold on steroids”: when the silver price goes up, it goes up rapidly, while when it goes down, it plummets.

On the demand side, with both silver and gold used for jewellery, silver often benefits if gold prices rise, prompting those looking for a ring or a necklace to switch to cheaper alternatives.  

Economic and geopolitical uncertainty also have an impact on both metals, as they become safe havens. In this, however, gold is more sought after, with silver sometimes dumped in favour of gold during a crisis. 

At the start of the Covid-19 pandemic, for example, the price ratio of ounces of gold to ounces of silver went from around 1:90 to 1:120 in just a few weeks. 

A further source of unpredictability and volatility is the large amount of silver kept off the market. 

This could be grandma’s old silverware in the attic, or a bullion warehouse stockpile. If the price rises to a certain point, supply of this type can surge.

“You simply can’t project when these stocks will be released onto the market,” says Kirilenko, “adding to the roller coaster”.

Green futures

Despite these challenges, however, silver has some strong fundamentals – particularly on the industrial side.

Silver paste and film is used in solar panel manufacturing, while silver is also present in a wide range of electronic and electrical equipment, given its excellent conductivity. All of these are elements vital to the global green energy transformation.

“Silver is a part of the growth story in the Middle East, as solar panels are being rolled out here at utility-level scales,” says Hansen.

At the same time, the UAE in particular has become a major centre for trading and refining silver – with this boosted by the UAE-India comprehensive economic partnership agreement.

“This allows India to import silver and gold from the UAE under progressively lower tariffs,” says Kirilenko. 

India is now the world’s biggest consumer of silver, and in February 2024 it imported a record 2,295 tones. In the whole of 2023, India imported just 3,625 tonnes, according to India’s Economic Times.

Much of the silver imported is traded through Dubai, which has been “a fast-growing business during the last few years”, says Kirilenko. 

Solar panels and silverware, electronics and electrical goods are the main uses for the imports.

While the GCC may lack silver mines of its own, it clearly still has a major role in the sector. That is, so long as it has a steady supply of one other metallic product – those necessary nerves of steel.

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