Global Silver Demand and the PV Industry

There are several key industries and sectors in which it is expected that silver demand will grow. Most notably, these include: a growing number of technology applications; the use of silver in photovoltaics (PV) for solar energy production; increased demand from ethylene oxide (EO) producers; and increased rates of jewellery fabrication, particularly in India.

Accompanying the expected uptake in demand is likely to be a decline in mine supply production in 2016 in the region of 5%, the first fall since 2002, with further decreases expected in production through as far as 2019. Price falls over recent years have meant that there has been little expansion in the industry and it is anticipated that this, combined with the expected increased demand outlined above, will create a market deficit.

The Growing Photovoltaic Industry and European Energy Policy

One of the largest growth areas in the consumption of silver is the photovoltaic industry (PV), owing to the fact that a form of silver paste is used in the production of PV cells.

Although there have been downturns in solar power production and installations in the recent past due to oversupply (in large part a result of reductions in government investment and cut-backs in consumer incentive schemes), the outlook is set to change. A drop in the price of solar panels, accompanied by an increase in their efficiency, has meant that demand is once more growing and production levels are expected to rise again.

As European governments, under the auspices of the EU Energy Union, seek to increase the role that solar plays in their respective energy mixes, it is expected that there will be continued growth in both domestic and industrial installations across the continent. Therefore, forecasts of increased growth in solar – and an associated rise in demand for silver – would appear to have a solid basis.

Why Silver is Currently Underpriced

Analysts examining the projected future demand for silver and the predicted market deficit have noted that, taking into account a number of fundamental factors, silver is currently significantly underpriced.

For instance, an expected rise in global demand for other commodities and their associated price movements should in turn ultimately lead to a rise in price for silver, as there has consistently been a correlation between the two. It is also expected that global inflation will impact on the price of silver, as previous times of international inflationary pressure have been accompanied by rises in the price of commodities. Thirdly, falling real interest rates in the US tend to be accompanied by rises in the price of gold and silver, and as there is no immediate prospect of significant interest rate rises by the Federal Reserve, in all likelihood this will mean an upward trajectory for silver prices. Finally, as discussed above, a continuing market deficit in the short to medium term is also expected to contribute to a steadily increasing price for silver.

However, it is the expected increase in demand for silver prompted by an expanding PV and solar energy market in Europe that may be the single dominant reason as to why silver is currently underpriced. As European governments look to renewables to diversify their energy supplies, solar is expected to be at the forefront of these developments, and the increasing use of silver in PV manufacture further supports the prospect of a long-running market deficit.

The Profit Potential of Silver

In conclusion, an ongoing market deficit in silver, combined with the fundamental factors that can be expected to affect its price as outlined above, all point to a rise in the value of silver throughout 2016, and likely beyond. Therefore, online brokerages dealing in silver have been directing investors and traders towards silver after identifying the significant potential for profit in this market.

In particular, it is expected that much of the growth in demand will come from the solar energy and PV markets in Europe, China and Japan, and with policy makers around the world looking to move out of fossil fuels into renewables, it is reasonable to conclude that there is potential for further significant growth which, when combined with a decline in supply, will see the global price of silver rise for some time to come.