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What’s So Special About Silver?
Silver is both a precious metal and an industrial commodity. Its unique status distinguishes it from other commodities. As an industrial metal, it plays an important role in electronics manufacturing, such as solar panels, and electric vehicles. At the same time, as a precious metal, silver serves as a store of value and an inflation hedge. Silver has a rich history along with gold and copper; it was one of the oldest kinds of cash, and it served as a standard unit of currency from 3000 BCE to 1873.
Silver In Numbers
The silver market, worth approximately $30 million per year, is modest in comparison to other commodities like copper and gold. This makes it more volatile, as even minor changes in supply or demand have a major impact on prices.
According to data from the New York Mercantile Exchange Comex, global silver prices have reached their highest level in five years. In 2024, the silver price has surged significantly: the spot price has risen by 28.70% in 11 months, reaching $30.63 per ounce on November 30, up from $23.65 at the start of the year.
At the close of silver trading on January 24, 2025, silver futures rose 2% to $31.19 per troy ounce. Over the year, their value has increased by 36.4%.
According to a report from Heraeus Precious Metals, the cost of silver is increasing due to the interest in solar power and the recovery of the Indian market.. Silver is an important component of photovoltaic panels for solar power plants. The latest rally in silver prices was driven by the announcement by new US President Donald Trump that he may impose tariffs on imports from some key trading partners, including China, said Ole Hansen, head of commodity strategy at Saxo Bank.
The Role of Silver in the Green Energy Market
The industrial sector currently accounts for around 58% of worldwide silver consumption, with the renewable energy industry playing a significant role. Solar technologies, electric vehicles, 5G networks, and consumer electronics are all driving demand for silver, making it a key material for innovation and the transition to clean energy technologies.
Solar panels
Silver plays an important role in the development of various clean energy concepts, including photovoltaic (solar) panels for both residential and commercial use. The field of green energy development is one of the fastest growing. A study by the University of Kent found that a typical solar panel can contain up to 20 grams of silver.
China is the world’s largest solar panel manufacturer, accounting for more than 80% of the global market. Despite a surge in silver prices last year that led some PV panel manufacturers to reduce their use of the metal, silver remains an outstanding conductor. It seems unlikely that solar panel manufacturers will find an acceptable substitute to silver in the near future.
Electric cars
Electric cars became increasingly popular due to their energy efficiency. It takes 25 to 50 grams of silver to produce one electric car, while 15 to 28 grams are enough for cars with an internal combustion engine. Silver, due to its high electrical conductivity and resistance to corrosion, has a significant impact on the production of electronics, including the circuits used in electric cars.
10 Factors Affecting Silver Prices Over the Past Decades (According to Research from Precious Metals Insights)
Supply and demand
Silver prices are determined by limited supply and stable demand. Any change in supply or demand, such as mining strikes or new silver technologies (such as solar power), can significantly affect prices, causing short-term fluctuations or increases.
Recycling
In the past, silver was widely used in photography due to its light-sensitive properties, which led to the development of recycling of this metal. However, as technology advanced and digital photography became more popular, the demand for silver fell, resulting in a drop in supply for recycling. Rising prices for silver jewelry, coins, and other items also stimulate remelting and increase the supply in the market.
Technological innovations
Technological innovations have both a direct and indirect impact on the price of silver. New technologies, such as solar panels, can stimulate demand for the metal, while older technologies, such as film photography, can reduce it.
Industrial use
Industrial uses of silver also play a significant role in many applications, including electronics and medical devices. Changes in industrial demand and economic cycles can have an unpredictable impact on prices.
Investor sentiment
Investor sentiment in the market also influences the price of silver. Factors such as investor confidence, economic conditions and geopolitical events play a significant role. Precious metals are currently not in the spotlight of investors, particularly due to the increased interest in artificial intelligence topics.
Currency Value Shifts
Since silver is traded primarily in US dollars, changes in exchange rates can affect its price.
Interest Rates
Additionally, interest rates also play a role in determining the price of silver, as changes in rates can affect investor decisions and cyclical industrial demand.
Stock Market Dynamics
Silver prices can correlate with stock market trends, both positively and negatively. A positive correlation is usually seen during periods of broad global economic growth, when the manufacturing and mining sectors benefit simultaneously.
Geopolitics
Negative price correlations could take place as global economic growth diverges and narrows in on specific investment themes. Geopolitical factors such as political instability, conflicts, and global events affect investor confidence and can increase demand for safe haven assets such as silver. This could be caused by production constraints, sanctions or supply chain disruptions.
Environmental standards
Increased environmental awareness and compliance with environmental regulations impacts extraction methods and production costs. Some projects become unprofitable, leading to a decline in production volumes.
Silver’s Future Outlook
Solar panels, electric vehicle components, and 5G technology are increasingly dependent on silver, as demand for the metal is expected to grow as countries strive to reduce carbon emissions. Silver’s high electrical conductivity, antibacterial properties, and scarcity make it extremely valuable in many technologies, especially those that help decarbonize the economy. The introduction of artificial intelligence is also driving demand for silver due to the need to modernize and upgrade technologies.