The Silver Frenzy Is Over, But Silver Has More Supporters Than Ever

The Silver Frenzy Is Over, But Silver Has More Supporters Than Ever

Reuters reports that February’s social-media driven rush to the paper silver market might not have lived up to expectations, but it nonetheless shone a light on a metal that has no shortage of tailwinds going for it. The frenzied army of day traders who hoped to bring silver’s price to three or four-digit figures came and went. But some of them have stuck around, bolstering a growing and diverse congregation of silver investors.

Who’s holding silver now?

New fans of silver include retail buyers who see plenty of appeal in the metal past any short-term buy signals. Holdings in the largest silver fund rose by 45% last year to reach more than 1 billion ounces, the highest amount on record. Individual investors and money managers alike were quick to jump on the silver wagon amid unprecedented panic and concerns over currency debasement after a historic monetary stimulus.

Most of these investors have held onto their silver, joining the ranks of Wall Street giants who have been stockpiling silver due to its abundant uses. Goldman Sachs’ hoard has continuously emerged as the most prominent one, with its analysts calling it their favorite metal for both economic and industrial reasons.

Where are silver prices going?

While silver hit an 11-year low of $11.62 as industrial activity slowed to a crawl in March, it appears the course is being reversed. Besides the recovery from the manufacturing sector, silver’s industrial case continues to be bolstered by a push towards green infrastructure. While this might not do much for silver’s outlook in the short-term, both the U.S. and China have committed to reaching carbon neutrality over the next few decades, with the Asian nation sporting a five-year green infrastructure plan that has captured the attention of many.

This leaves short-term price predictions which could swing either way, but are nonetheless very much aligned in silver’s favor at the moment. The Silver Institute forecasts an average silver price of $30 for 2021, just short of its current $28 valuation. Given silver’s known volatility and taking into account that the year has only begun, this could very well translate to some explosive price action to the upside over the coming quarters.

The latest Commitments of Traders Report shows that money managers, by and large, remain bullish on silver’s prospects. For the most part, retail investors are quick to buy into silver dips and far more reluctant to take profits. Combined with the influx of new investors and lots of favor from old ones, February’s frenzy may turn out to be the first of many interesting developments in the silver market.

Silver Demand at 8-Year High; Solar Industry Expects 11% Price Gain in 2021

Silver Demand at 8-Year High; Solar Industry Expects 11 Percent Price Gain in 2021

With so much focus on the surge in investment demand for silver and the surrounding bullion shortages, it’s easy to forget that the metal remains a key component of a rapidly-expanding industry. A recent forecast by The Silver Institute placed the average annual target for silver at $30, a 46% climb compared to last year that will be driven not only by investment and jewelry demand but also the growth of the photovoltaics (PV) industry.

In a statement, the institute said that this year’s demand for silver is expected to reach 1.025 billion ounces, and that the metal will therefore shed any losses sustained last year. Talking to the magazine, The Silver Institute’s executive director Michael DiRienzo expanded upon some of the industry’s underpinnings, along with what it would take for the sector to create a supply glut similar to the one happening in the investment sphere.

How solar panel “thrifting” influences demand

The institute, as well as other experts in the field, have continuously singled out thrifting as one of the most important parts of industrial silver demand. The process refers to manufacturers’ efforts to reduce the amount of silver necessary in each solar cell due to the metal’s high price. This form of cost-cutting has brought the silver contents in an individual solar cell to an average of 111mg in 2019, and The Silver Institute expects the trend to lower the per-cell silver content to 80mg by 2030.

However, it has been repeatedly stated that thrifting is a process which peaked out in 2016, and that the sector can only spread the silver in a given cell so thin. On the flip side, DiRienzo noted that a growing number of countries are turning to solar panels, adding to a broader bid by global governments to look for green energy solutions.

With current technologies, silver accounts for about 6% of the total cost to produce a photovoltaic panel.

Despite thrifting, solar demand for silver grows

Keeping this in mind, DiRienzo said that the institute expects the PV industry to purchase 105 million ounces of silver this year, a significant increase compared to the 88 million ounces last year and 93 million ounces in 2019. As for price changes, DiRienzo said that silver could once again outperform gold due to its smaller market and higher volatility. The director went on to say that an average annual price of $40, or peak prices of $45, would create a problematic environment where the silver industry begins facing supply issues, especially due to the absence of further cost-cutting methods.

This is especially important considering the slow decline in global silver production over the last four years. Because nearly 75% of newly-mined silver comes from projects where it’s a by-product of the primary metal being mined (usually copper, lead, or zinc), silver supply isn’t elastic. If demand does reach a critical level, supply can’t be expected to increase quickly or at an equivalent magnitude.