The demand for silver is expected to expand along with the continued growth in global connectivity.
According to a report released by the Silver Institute, silver demand in electronics and electrical applications is projected to rise by 10% by 2025.
This reflects an increase from 224 million ounces of silver used in the electronics sector in 2020 to 246 million ounces in 2025.
With the highest electrical conductivity of all metals, silver is a component in almost all electronic devices we use daily. But silver isn’t just vital today; the next generation of technological advancements, especially those related to global connectivity expansion, will rely on the white metal’s inherent properties throughout the 21st century.”
This does not include increased demand for silver in the solar energy sector, which is also projected to rise sharply in the next decade. Solar power generation is expected to nearly double by 2025 according to a report released in the summer of 2020.
As the Silver Institute notes, silver plays an important role in providing increased access to information, global markets, and communication.
Silver is integral to applications used to forge connections across the globe. These include the expansion of 5G communications technology and the joining of once ‘unintelligent’ goods to a greater ecosystem through the ‘Internet of Things’ (IoT), the network of historically non-communicative physical objects that are now able to relay information. For example, silver is at the heart of many new technologies that establish reliable and instantaneous connections between people and a wide array of machines, appliances, and devices, including smartphones, white goods, and exercise equipment.”
Silver is also an important component of RFID chips that are being increasingly used in the logistics and supply chain sectors. Projected usage of silver for RFID’s is expected to increase as much as 400 hundred percent through 2030.
The global push toward “green” energy will also boost demand for silver. Silver According to the International Energy Agency’s Sustainable Development Scenario, the proportion of electricity generated globally from renewables will increase from 29 percent in 2020 to 49 percent by 2030. In 2018, analysts projected green technologies would consume over 1.5 billion ounces of silver over the next twelve years.
On the supply side, silver mine output was hit hard by the pandemic. Production is projected to fall by 6.3% to about 780.1 million ounces in 2020. The big drop in silver output is largely a function of mine shutdowns due to coronavirus, but mine output was already trending down before the pandemic. Global mine production fell by 1.3% in 2019.
Silver prices (along with gold) have been under pressure in recent months primarily due to expectations that the Fed will soon tighten monetary policy. But as Peter Schiff has noted, a slight slowdown in asset purchases does not equal a “tight” monetary policy. Furthermore, Peter thinks any tapering will be short-lived and the Fed will ultimately expand QE.
The silver-gold ratio has widened recently, indicating that silver is undervalued compared to gold. Given the trajectory of monetary policy and the supply/demand dynamics, the environment appears bullish for silver in the long term.
Silver has hit an all-time high of $49 per ounce twice – in January 1980 and then again in April 2011. If you adjust that $49 high for inflation, you’re looking at a price of around $150 per ounce. In other words, silver has a long way to run up. As one analyst put it, “With the long-term downside potential of silver very low versus its current valuation, the risk/reward is one of the best investments on the planet.”
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