In the past two years, silver’s use in industrial applications reached new record levels — and in 2023, the demand for the precious metal exceeded the available supply for the third year in a row, according to the nonprofit Silver Institute association.
During that time frame, silver prices didn’t escalate the way some investors had likely hoped; however, given that 50% of the demand for silver is for a wide-ranging variety of industrial purposes, that could soon change, says Everett Millman, precious metals specialist at Gainesville Coins.
“[Silver] is used in solar panels, electric vehicles — all of these technologies require massive amounts of silver,” Millman says. “The price hasn’t responded to it yet, but that 50% portion of silver demand that’s [used in] industry all gets consumed. It gets destroyed essentially every year. That means that the silver supply is definitely at risk of being undersupplied, relative to demand.”
The Silver Institute has predicted the global demand for silver will increase to 1.2 billion ounces this year, which would be the second-highest level on record. The organization also anticipates a silver shortage will occur through 2027.
Performance Pattern Considerations
Since the 1970s, silver’s price has spiked by 50% or more at least once or twice a decade, according to Millman. Silver has even had 50% to 100% rallies in the span of a few months at points — in 2010, for example, right after the financial crisis, and in 2007 leading up to it, in 2001 when the dot-com bubble burst, and at the beginning of 2005 when the real estate bubble began to inflate.
In the past, Millman says economic weakness has been the biggest catalyst for those increases, which could indicate some signs to watch for.
“Are other financial markets very frothy?” Millman asks. “Are valuations very high elsewhere? Basically, are there fears of a bubble? Anytime you have those types of concerns, that’s the scenario that sets silver up for a big run. It’s not always when there’s a market crash; it’s when there’s a high level of risk, leverage, and uncertainty in financial markets.”
The uncertainty surrounding exactly when silver prices might have a tremendous rally for a short time before retreating to their previous level may frustrate some investors; however, silver currently is at a lower price point than assets such as gold, which could present an opportunity, Millman says.
“Rather than trying to time it, it’s a reasonable strategy to just buy silver when it is relatively undervalued,” the Gainesville Coins precious metals specialist says. “You don’t have to be able to predict the future. We know silver is very cheap right now relative to other things, so if you buy a lot of it, you have some massive upside potential that you really don’t have with something like the stock market, given that stocks [have been] at all-time highs. I don’t think even the person who’s most bullish on equities thinks the S&P 500 is going to go up [more than] 25% in the next year — but that could absolutely happen with silver, as bold as that sounds.”