Silver is Rising: The Key Factors Fueling Demand

Michael DiRienzo, president and CEO of trade body The Silver Institute, said global silver demand reached 1.2 billion ounces in 2024, driven by the photovoltaic (PV) solar market which uses silver to make equipment such as solar panels. 

Industrial consumption surged 7% to 700 million ounces, also driven by strong demand from electric vehicle (EV) powertrain and charging infrastructure, he added. Renewable energy growth and AI's surging electricity requirements, also bolstered sales.

And "the market is ripe for growth in 2025," enthused DiRienzo, adding that uptake could exceed last year's gains with electrification continuing across the globe. 

Rising economic and geopolitical risks should continue to support silver, he added, as investors look to manage medium-to-long-term uncertainty.

DiRienzo noted that the closely watched gold-silver ratio (which tracks how many ounces of silver are needed to buy one ounce of gold) has also gained recently, raising silver's attractiveness. A rising ratio means silver is undervalued against its yellow cousin. The volatile gauge is hovering around 89 as of early March, up from an average of 60 during the past 20 years – though it briefly surged to 125 during the COVID-19 pandemic.

Despite its growing popularity, silver faces challenges. 

"Silver is in great need of institutional investors," said one analyst. "We need hedge funds, pension funds and other institutional investors to get into the silver space."

Silver's structural deficit is projected to continue in 2025, and could pose challenges to the energy transition if the deficit continues.

"If we are really going to have all these gigawatts and terawatts of renewable power out there, where will it all come from [to achieve net-zero emissions] by the year 2060?” asked the analyst.

To meet future demand, a slew of mining projects are currently on the drawing board, including nine facilities that will add 44 million ounces in the next five to 10 years, according to Jeffrey Christian, a senior analyst at CPM Group. Mining activity has been gradually increasing since 2020 when silver prices started rising after a seven-year lull, he added.

The new mines will be built in Mexico, Australia, Russia and Peru, where most production of silver takes place to feed manufacturing plants in China, Taiwan, India as well as jewelry making in India, Thailand, China and increasingly Egypt. 

Still, Christian noted the world has plenty of silver reserves and believes current deficit estimates are exaggerated. 

Asked about other risks – such as strikes or political uncertainty in Mexico, by far the world's largest producer of silver – Neumeyer expressed confidence that President Claudia Sheinbaum can steer the industry in the right direction. 

Mexico is a key market for silver-mining company First Majestic – its Santa Elena mine produced a new annual record of 10.3 million silver equivalent ounces in 2024, representing a 7% increase compared to 2023, according to a company press release.

Meanwhile, Philip Newman of Metals Focus in London said the reported deficit won't last forever and that higher prices could face resistance by so-called thrifting, a process through which manufacturers replace costly parts with newer, less expensive ones to cut costs. 

"We don't see these deficits as the new normal," he said. "At $30 an ounce, margins will be pressured so solar panel manufacturers in China or India will begin looking for substitute components, creating demand destruction."

Whatever happens to prices, silver uptake should remain strong as the energy transition gains steam and the wheels of commerce continue to spin. 

After all, "anything that has an on-or-off switch needs silver," DiRienzo said.