by Jesse Colombo, BullionStar:
Since early-March, precious metals have launched one of their sharpest rallies in decades. Gold surged by 16% and silver by 26%, which are significant moves for safe-haven assets — especially considering that it played out over such a short time period. During this rally, gold has received the lion’s share of the attention because it has been hitting all-time highs, while silver has yet to exceed its 2021 high of $30.13 — let alone its all-time high of $49.81 that was reached all the way back in 2011. Though silver has been languishing for the past several years, there are numerous reasons why it may be on the verge of one of its most powerful bull markets in history.
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Silver Demand is Growing Rapidly
Though silver is most known for its use in jewelry, silverware, coinage, and bullion products, the largest source of silver demand is actually industrial in nature. Thanks to its unique physical, chemical, and electrical properties, silver is used in electronics, solar panels, automobiles, photography, medicine, the chemical industry, and much more.
The growing number of uses for silver combined with ongoing global economic growth is causing a substantial increase in industrial demand for silver. According to the latest report from the Silver Institute, industrial demand for silver grew by a solid 11% to a record of 654.4 million ounces in 2023, which came on the heels of a record year in 2022. Silver used for photovoltaic (PV) applications skyrocketed by 64%, which caused electrical & electronics demand to increase by 20% in turn. As the push for so-called “green” energy continues, photovoltaic silver demand should keep growing at a rapid rate. The Silver Institute predicts a 9% increase in industrial demand for silver in 2024.
The steady increase of industrial demand over the past decade is driving overall silver demand higher:
There is a Structural Silver Deficit
Since 2021, there has been a deficit of silver due to demand exceeding supply — a condition that has helped to boost prices and should continue to do so for the foreseeable future. Strong demand combined with tepid supply increases led to a deficit of 184.3 million ounces in 2023 and are expected to lead to an even worse deficit of 215.3 million troy ounces in 2024.
The chart below shows how the silver deficit has grown significantly over the past few years:
While silver demand has grown at a healthy clip over the past four years, the overall supply of silver has been flat for more than a decade:
Global mine production of silver has actually been declining for the past decade:
(Read our recent report about the structural silver deficit and why it is likely to persist and even intensify.)
Above-Ground Supplies Are Dwindling
The silver deficit of the past few years is causing the above-ground supply of silver to dwindle at a rapid rate:
The total London Bullion Market Association (LBMA) silver inventory decreased by 30% from its peak in 2021:
The total COMEX silver inventory (a measure of U.S. silver inventories) fell by 27% since 2021:
The total silver inventory on China’s Shanghai Gold Exchange fell by an incredible 73%:
The total silver inventory on China’s other main silver trading venue, the Shanghai Futures Exchange (SHFE), also fell precipitously:
