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Tight supply and strong demand pressure silver prices

Jewellery makers will feel the impact of rising silver prices, as will industries including solar photovoltaics and electric vehicles Getty Images/Unsplash+
Jewellery makers will feel the impact of rising silver prices, as will producers of solar photovoltaics and electric vehicles
  • Industrial demand up 7% in 2024
  • Supply threatened by Trump tariffs
  • Solar panel and EV usage surges

Gulf investors – and romantics – may have to keep a watchful eye on silver in the months ahead as tight supply and strong demand make their impact on prices.

This will not only have consequences for those looking for jewellery, but also for industries ranging from solar photovoltaics (PV) to electric vehicles (EVs), and from data centres to artificial intelligence, all major sectors in the region.

Figures from the Silver Institute show industrial demand for the precious metal grew 7 percent last year to account for about 60 percent of the total 1.2 billion ounces of silver produced worldwide in 2024.

This demand surge happened in a year when supply from silver mines increased by only 1 percent, with supply likely to suffer further as a result of new trade wars.

Mexico, the world’s largest silver miner, for example, has been threatened with 25 percent tariffs by US President Donald Trump.

Such statements heighten global economic uncertainty – driving more traditional demand for silver as an investment metal and place of safety.

Trump and technology may, however, also act as future dampeners on silver demand. 

The new administration is seeking to unwind EV and renewable energy programmes, while new technologies in solar panels may mean silver demand from these products peaks in the short term.

Nonetheless there is strong demand for silver elsewhere. 

“While there are some headwinds, I’d say we’re still cautiously bullish on silver,” Kirill Kirilenko, London-based precious metals market analyst with CRU, tells AGBI.

Rising deficits

For four years running now, global silver production has been less than silver demand. 

“The total 2024 market balance is forecast to be a 265.3 million-ounce deficit,” said Vijay Valecha, Dubai-based chief investment officer with Century Financial. “That’s the second-highest in more than 20 years.”

About 80 percent of supply comes from mine production, the rest from recycling. 

About half of the cost of that mining is linked to energy, with the rising price of this impacting miners’ profitability. Some miners also report a shortage of skilled labour, with this impacting productivity.

At the same time, “all the largest silver mines are already operating either at peak capacity, or close to it,” says Kirilenko. “The pipeline of mining projects is thinning out and it is also getting more and more difficult to start new ones because of rising costs and other factors.”

Solar panels and EVs

Demand has been surging, led by solar PV panels and electric vehicles.

According to the International Energy Agency, solar panels could account for more than 30 percent of demand by 2030, up from just 10 percent in 2024. 

A single EV, meanwhile, can require 25-50 grammes of silver, according to a recent report by the Silver Institute.

Silver is used by these technologies because it has high conductivity and durability. 

This makes it ideal for use in components including semiconductors, robotics and data centres – all key parts of the AI revolution.

The results of this supply-demand imbalance are stark: in 2024, spot silver prices rose 21.46 percent, year on year. In the year to date, they have risen a further 4 percent, according to Strategic Metals Invest, to stand at $973.47 per kilogram on January 23.

Future shocks

There are, however, some possible downsides to factor in. First, technology is a two-edged sword. 

Silver benefitted, for example, from the technological breakthrough of the bi-facial solar PV panel.  This effectively doubled the amount of silver required by each solar farm, but further efforts to boost efficiency may see the removal of busbars. 

Busbars are the grids of lines criss-crossing the surface of the panel. These do not produce any energy, but connect the cells of the panel together. New technologies are now emerging, however, that would remove most of these lines.

“That would reduce silver usage by about 20 percent,” says Kirilenko.

The Trump effect

President Trump’s recent decree pausing disbursement of funds for schemes supporting EV development in the US may also impact sales. The new president is also widely known for his favouring of fossil fuels over renewables.

Yet, these factors may not be sufficient to overcome both silver supply shortages and hikes in demand for industries such as AI.

“We don’t see these factors as a reason to be bearish,” Kirilenko says.

In the shorter term, Valecha anticipates that market conditions will keep silver prices “elevated”,  reaching “anywhere between $38 and $45 per ounce in 2025”.

It might be an idea, then, to buy that Valentine’s Day jewellery sooner rather than later this year.