Why can silver be the "second gold"? - The increase in global demand and the deficit in production will encourage investments
Silver is experiencing increased demand, particularly from the solar industry and electric vehicles, creating a supply deficit that could lead to higher prices. Experts point out that this trend could make silver appear as a more attractive investment opportunity than gold.
Silver is poised to archive one of the best performances of the last ten years and with accommodative monetary policy and geopolitical threats, it could emerge as a reserve of value. Commodity experts at Global X point out that continued growth in industrial demand, particularly from the solar sector in China, has led to a gap between supply and demand expected to reach 17% in 2024, increasing the possibility that prices will rise in the near future, also thanks to a ratio with gold currently above historical averages.
With a market deficit and growing industrial demand, silver now offers an interesting opportunity for investors, experts point out. In 2023, continuing a three-year trend, physical demand for silver has exceeded supply. Industrial demand for silver also continued to grow, reaching a record high thanks to strong demand in the solar sector and for electric vehicles. In 2023 alone, China's industrial demand for silver will increase by 44%, accounting for more than 40% of the global industrial total.
According to Bloomberg's baseline scenario, global PV installations are expected to grow by 125% by 2030. China accounts for most of this projected growth, with domestic installations potentially expected to grow by 66% more over the same period.
On the supply side, experts say the global silver market is in deficit, with Mexican producers appearing to be the main culprits: global mining production fell 1% from last year, reaching 830.5 million ounces in 2023 , while Mexico recorded its first production cut since 2020 due to strikes.
Macroeconomic drivers could support silver, even more than gold, according to researchers. The two precious metals can be easily compared, despite some differences, such as market size, in which silver finds less of a place, and industrial use, which contributes about 54% of the annual demand for silver compared to 7% for gold. Despite these differences, silver is often referred to as the "second gold" as falling real yields and a weaker US dollar can support both metals. The gold-silver ratio, which measures the amount of silver needed to buy an ounce of gold, has averaged 67 over the past 30 years. With gold at all-time highs and the ratio currently above 80, silver may offer opportunities by being less expensive and emerging as a store of value.
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