Solar Energy Industry Expected to Remain Steady Source of Silver Demand

The solar power industry is expected to create a steady source of demand for silver in the coming years, according to a new report released by the Silver Institute.

Silver just charted its best month in nine years, with the price of the white metal gaining 20.7% in May.

Silver has been poised for a run up for quite some time. In March, the silver-gold ratio hit an all-time high of over 120-1. Silver had never been that undervalued compared to gold in over 5,000 years of human history.

The Federal Reserve’s massive money-printing campaign is bullish for both silver and gold. Historically, silver has outperformed gold in a gold bull market. Peter Schiff reiterated this in a recent podcast.

That’s why I’ve been pretty much pounding the table for people to buy silver. Because not only is silver going to rise, in my opinion, but it’s also going to rise relative to the price of gold, which is also going to rise.”

Supply and demand dynamics also provide a reason to be bullish on silver. Investment demand was already surging before coronavirus.  Global silver investment jumped 12% to 186.1 million ounces last year. And while industrial demand was sluggish last year, the Silver Institute Report says the solar power industry will likely provide an important and consistent source of industrial demand for silver over the next ten years.

According to the report, solar power generation is expected to nearly double by 2025.

A combination of global efforts to reduce fossil fuel reliance, legislation to lower carbon emissions, and favorable government tax policies, should result in a continued expansion of solar panel installations over the next decade.”

A recent report from the World Bank forecasts that by 2050, consumption of silver in energy technologies could grow dramatically, reaching a level equivalent to more than 50% of current total silver demand; the largest proportion for any non-battery metal.

Silver possesses the lowest electrical resistance among all metals at standard temperatures. According to the report, “Potential substitute metals cannot match silver in terms of energy output per solar panel.”

Further, due to technical hurdles, non-silver PVs tend to be less reliable and have shorter lifespans, presenting serious issues for their widespread commercial development.”

The report project that from 2020 through 2030, the PV sector will consume a cumulative 888 million ounces of silver; equivalent to an average of 81 million ounces per year.

Silver is historically more volatile than gold because due to industrial demand, but the solar power industry should help steady overall industrial demand for the white metal.

Looking at the bigger picture, at its core, silver is a monetary metal and it tends to track with gold over time. And as already pointed out, it has historically outperformed gold in a gold bull market.

The silver-gold ratio tells us the white metal is still significantly undervalued. History tells us silver will eventually close the gap with gold. That means either gold will drop or silver will rise. Given the economic dynamics and the current extraordinary monetary policy, a continued gold bull run seems more likely and silver will probably come along for the ride.