In the realm of precious metals, silver has long stood in the shadow of its more illustrious counterpart, gold. However, recent market dynamics suggest that silver is poised to step into the limelight, offering compelling opportunities for astute investors. Over the past decade, shifts in supply and demand, coupled with evolving price relationships between silver and gold, have redefined the silver sector.
The silver market has experienced notable fluctuations in supply and demand over the past ten years. In 2023, global silver demand surged by 18% to a record high of 1.24 billion ounces, leading to a significant supply deficit. This trend is projected to continue, with the deficit increasing to over 200 million ounces in 2024.
The primary drivers behind this growing demand include robust industrial applications, particularly in the renewable energy sector, and increased investment interest. In this regard, with a high proportion of industrial demand, which takes it out of circulation, silver has more similarities to base metals than other precious metals like gold.
On the supply side, silver mining has faced challenges. While mine production rebounded by approximately 5% in 2021 following pandemic-induced disruptions, it did not meet the anticipated growth of 8%. Factors such as declining ore grades and limited new mining projects have contributed to a relatively stagnant supply. Total global silver supply only grew by 1% in 2024 (as compared to forecasts of 3%), reaching 837 million ounces.
The gold-to-silver ratio, which indicates how many ounces of silver are equivalent in value to one ounce of gold, has been a critical historic metric for investors. Historically, this ratio was relatively stable; for instance, the Roman Empire set it at 12:1. In the modern era, the ratio has exhibited more volatility. In the 20th century, it reached a peak of 98:1 in 1939 during World War II. In the 21st century, the ratio has mostly ranged between 50:1 and 70:1, with a notable peak of 104.98:1 in 2020 during the COVID-19 pandemic.
As of February 2025, the ratio stands at approximately 85:1, potentially suggesting that silver is undervalued relative to gold. Historically, such disparities have often preceded periods where silver outperforms gold, as investors seek to capitalise on the relative value gap.
In recent years, the silver sector has undergone significant changes, driven by a combination of industrial demand, investment interest, and supply challenges.
One of the key factors reshaping the industry is the expansion of industrial demand. Silver’s unique properties, such as its exceptional conductivity and reflectivity, have made it an essential component in various industries. The photovoltaic sector has seen remarkable growth, with silver playing a critical role in solar panels – each one containing around 20 grams of the precious metal. As global efforts to transition to renewable energy gain momentum, the need for silver in solar technology is expected to increase significantly. Beyond the energy sector, silver’s role in electronics and the automotive industry, especially with the rise of electric vehicles, has further fueled industrial demand.
Meanwhile, the demand for silver from investors has surged. Economic uncertainties and geopolitical tensions have historically led investors to seek safe-haven assets, and silver has proven to be a strong choice in this regard. Both institutional and retail investors have been turning to silver, with the iShares Silver Trust holding approximately 430 million ounces of silver, out of the 700 million ounces represented by the entire ETF market. This surge in investment interest has added pressure to an already tight silver market.
However, the supply of silver has struggled to keep up with this rising demand. Mining production faces several challenges, such as declining ore grades, stringent regulatory hurdles, and a lack of new mining projects to offset decreasing output. Furthermore, since a large portion of silver is extracted as a byproduct of other mining operations—like gold, copper, and zinc—the fluctuations in these industries can have a direct impact on the availability of silver.
The silver sector is going through a transformative phase, driven by evolving supply-demand dynamics and shifting investor perceptions. For professional investors, particularly those focused on mineral exploration companies, understanding these trends is crucial for making informed decisions.
As silver continues to assert its dual role as both an industrial commodity and a store of value, the sector offers promising avenues for growth and investment. As EV growth starts to accelerate (which would also likely correspond to a rebound in lithium pricing) or markets deteriorate (potentially due to the US led global trade war), the flight to safety may be a net positive for the silver sector.
