Gold Digger: is it time to get proper bullish on silver?
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The main argument for an upcoming silver bull run is twofold.
One, people use precious metals — gold and then silver — as a way to store value if they are worried about currency debasement or inflation.
If you believe we are only in the beginning stages of a gold bull run, then silver will invariably come along for the ride.
Two — silver actually has growing industrial uses, particularly in solar panels and electric vehicles/ charging infrastructure.
“About 10 per cent of the physical demand for silver currently is for solar panels,”says Sarah Kiernan of Goldman Sachs’ Global Markets Division.
“Both the US and Chinese administrations have very aggressive growth targets for solar power, which will increase demand [even more].”
Solar power generation is expected to double by 2025 to about 1,100 gigawatts from just over 600GW currently.
The industry – which barely existed until comparatively recently – will consume 888 million ounces of silver over the 2020s, or about 81 million ounces of silver per year, according to metals consultancy CRU.
Precious metals consultancy Metals Focus reckons it will consume 1 billion ounces from 2020 to 2030.
Current global silver production is just under 1 billion ounces per year.
Then there’s electric vehicles. Modern day petrol or diesel-driven vehicles use ~15 to 28 grams of silver, a figure that has been rising over recent years.
EV’s each consume between 25 to 50 grams of silver, with additional amounts needed for charging stations, large stationary batteries, and associated infrastructure.
The number of EVs sold will rise to ~30 million in 2028 – that’s 26.5 million to 53 million ounces of silver per year alone.
The main reasons people are bullish on silver – its use as a ‘hedge’ and in Environmental, Social and Governance (ESG) applications — hasn’t changed over the past year or so, Kiernan says.
“US investors and asset managers were probably interested as a ‘thought experiment’ on what could happen on either inflation or ESG investment,” she says.
“They are now really focussed on that as a real risk to their portfolios – and potentially something they need to allocate into.”
Here’s how ASX-listed gold & silver stocks are performing:
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