Silver prices are grappling with economic uncertainty and the weight of restrictive interest rates, hindering investor demand. Despite these challenges, the Silver Institute’s latest report suggests a robust outlook for the white metal, fueled by its role as an industrial asset.
In its Tuesday publication, the Institute projected that global silver demand is poised to reach 1.2 billion ounces in 2024, marking the second-highest level on record. Analysts emphasized that increased industrial offtake is a significant driver behind the growing global demand for silver, with the sector anticipated to achieve a new annual high this year.
Industrial silver demand is expected to surge by 4% in 2024, reaching a record 690 million ounces. This uptick is attributed to the critical segments of support within the broader global green energy transition, such as solar energy and electric vehicles. The report noted that global photovoltaic (P.V.) installations surpassed initial expectations in 2023, with projections indicating another record high this year. Additionally, advancements in technology, particularly the mass production of higher-efficiency N-type solar cells with increased silver loadings, are anticipated to further boost silver offtake. In the automotive industry, the growing use of electronic components and investments in battery charging infrastructure are set to support silver demand.
The Institute also highlighted the potential for the growing Artificial Intelligence (A.I.) sector to drive demand for consumer electronics, providing an additional avenue of support for silver’s industrial applications.
Despite strength in the industrial sector, investor demand remains a weak spot in the silver market. The Silver Institute anticipates a 6% drop in physical investment in 2024, reaching a four-year low. This decline is attributed to solid economic growth and gains in the U.S. stock market, which are expected to dampen investor interest across precious metal coins and bars.
While silver prices experienced volatility in the early months of the year due to uncertainty over the Federal Reserve’s monetary policy stance, the market struggled to recover from a recent selloff that tested critical support near $22 an ounce. The Silver Institute remains optimistic that investment demand will return, particularly when the Fed starts cutting rates, likely in mid-2024.
Federal Reserve Chair Jerome Powell’s recent remarks, pushing back on market expectations for a March rate hike, have influenced silver prices. Despite signaling easing in 2024, Powell emphasized that rate cuts would be contingent on greater confidence in inflation moving sustainably toward 2 percent. Silver prices faced challenges amid these developments, trading at $23.005 an ounce, down nearly 1% on the day. Analysts, however, believe that silver’s positive fundamentals will encourage renewed investor interest once the Fed signals further easing, possibly in the coming year.
