Industrial demand led by solar sector to drive silver prices to $35 in 2025, $38 in 2026 - Capital Economics
Thu Jan 30 2025
Although silver is currently struggling to emerge from gold’s shadow, growing industrial demand and dwindling supplies should help the precious metal shine in its own right, according to one research firm.
Gold continues to be the preferred safe-haven asset as investors seek protection against the growing turmoil in equity markets. However, Ankita Amajuri, Assistant Economist at Capital Economics, said that silver’s role in critical industries will continue to drive prices higher over the next two years.
In her outlook for silver, Amajuri said she expects silver prices to rise to $35 an ounce this year, with the rally continuing to $38 an ounce by the end of 2026.
The bullish outlook comes as silver continues to struggle against gold. This week, the gold/silver ratio hit a one-year high, testing long-term resistance at 92 points. While the ratio has fallen from its recent highs, it remains fairly elevated at 89.58 points.
Although sluggish economic growth in China has weighed on global demand for some industrial metals, Amajuri said silver’s industrial demand appears more robust. She pointed out that silver is a critical metal in fast-growing sectors such as 5G technology, photovoltaics, batteries, EVs, and biotechnology. Silver is also an important metal for semiconductors, which are essential in powering the artificial intelligence race.
“While AI is currently used mostly in the IT sector, we remain confident that, over time, artificial intelligence will expand into all sectors, driving strong demand growth for semiconductor chips—and, consequently, silver. Silver’s ‘smart’ and ‘green’ credentials set it apart from other precious metals,” Amajuri wrote in her report.
The biggest industry driving silver demand is solar power. Citing estimates from the International Energy Agency, Amajuri noted that global solar PV capacity between 2024 and 2030 will be three times what was installed in the previous six years.
“What’s more, the latest generations of more efficient PVs now use 20-120% more silver per kW of electrical capacity than previous versions. In total, silver demand from the photovoltaic industry has grown from 6% of total silver demand in 2015 to over 19% in 2024. We expect this share to exceed 30% by 2030,” she said.
In a separate report, analysts at Wood Mackenzie noted that China continues to lead the way in solar power development and production, as the nation exports its clean energy technology.
Wood Mackenzie reported that Chinese companies hit a significant milestone in their overseas power development, installing a record 24 gigawatts (GW) of capacity in Belt & Road (B&R) countries last year. The analysts added that renewable energy sources, particularly solar and hydropower, led 2024 installations, reflecting a clear shift toward greener technologies. The report highlighted that solar energy accounted for two-thirds of the new renewable capacity added in 2024.
“The rapid growth in overseas solar projects in 2024 is remarkable,” said Alex Whitworth, Vice President and Head of Asia Pacific Power and Renewables Research at Wood Mackenzie. “Chinese companies are heavily prioritizing greener technologies overseas, and these now make up over two-thirds of the project pipeline. As Chinese manufacturers drive down the costs of renewable power technology, they are leading its deployment in many developing markets that previously could not afford it.”
While demand plays a critical role in the silver market, Amajuri said it is only half the story. She noted that supply is not expected to keep pace with demand over the next two years.
“Mine production has remained stagnant since the pandemic. While recycled silver met around 15% of total demand in 2024, we believe the complex technical process and high costs will limit growth in recycling—at least at current silver prices. Moreover, most solar panels and semiconductors in use today will not be decommissioned for another couple of decades,” she said. “Admittedly, the supply and demand dynamics in the silver market have already started pushing prices higher. The silver market has been in a deficit since 2019, and prices have doubled over that period.”
Source: https://www.kitco.com/