A GROWING DEMAND and insufficient supply. It is the mix of factors that could push up the prices of silver, whose rally on the financial markets is probably only just beginning. Benjamin Louvet, who heads the division dedicated to raw materials at the investment house Ofi Invest AM, thinks so. When it comes to precious metals, in the financial community attention is mainly focused on gold, considered the safe haven par excellence. But today, according to Louvet, the prospects seem very positive for silver in particular, first and foremost for one reason: it is the only raw material whose value depends to a large extent on both industry and finance. On the one hand, in fact, silver is a store of value, albeit more volatile than gold. On the other hand, underlines the Ofi AM manager, it is a precious metal widely used in the development of circuits, wiring and other electronic components such as those present in our smartphones.
But silver is also present in numerous car models and is also widely used in the pharmaceutical sector or in the biotechnology industry as a new generation biocide. “All these uses plus the difficulties in finding a valid substitute in nature are laying the foundations for a profound transformation of the market”, continues Louvet, predicting that this precious metal will be characterized by robust growth in demand, but also by a supply which will struggle to satisfy it, thus decreeing a strong upward trend in the price. In fact, the Ofi AM expert points out that in 2023 the overall production of silver was 29 thousand tons, of which 23,800 came from the so-called “primary output”, i.e. from mining activities. Only just over 5 thousand tons were the result of recycling operations. If production from active mines or from planned activities are added to these quantities, the total amount of metal available reaches 107,812 tonnes, which is the equivalent of four years of production at current rates. Finally, the silver reserves must be counted, which are estimated in the order of 530 thousand tons, corresponding to just 20 years of extraction. Louvet also points out that, as is happening with other commodities, in the silver mining industry there are unrest, strikes and widespread discontent among the population of the major producing countries. Which obviously creates further brakes on global production.
These numbers make it clear that the supply of this precious metal is becoming increasingly scarce. On the opposite front, demand shows no signs of slowing down and in 2023 it amounted to 33 thousand tonnes, causing a market deficit of 15% for the third consecutive year. What requires large quantities of silver is primarily that varied set of activities linked to the energy transition such as the creation of solar energy systems. According to the most accredited estimates, the green business alone absorbed more than 15% of the global silver requirement in 2023 and in 2024 it will reach 20%, compared to 5% in 2014. It is true that there are producers who are already looking substitutes such as copper, but they currently have to face two major obstacles: the worse performance of this material compared to silver and the strong increase in demand that copper is also experiencing.
