-
Silver will lead the metals sector with 14% gain in 2025 as solar demand tilts market into long-term deficit – StoneX 2025 Outlook
Fri Jan 24 2025
Silver is set to outperform all precious and base metals this year as its monetary status enables it to follow gold prices higher, while also benefiting from the rising floor of industrial demand, according to StoneX Financial.
In their 2025 Annual Metals Outlook published Wednesday, StoneX Head of Market Analysis for EMEA & Asia Rhona O’Connell and Senior Analyst of Base Metals for EMEA & Asia Natalie Scott-Gray outlined their case for hybrid metal silver as the likely top performer in 2025, along with industrial metals copper and tin.
“This year’s review and outlook for the major base and precious metals markets from the London analysts at StoneX Financial Ltd targets silver, copper, and tin as the metals to watch this year, while aluminium is the one of which to be wary,” StoneX wrote in a press announcement.
“One key to the study’s conclusions is the rate of growth in the green and digital transitions, both of which favour the three metals that the team is highlighting,” they said. “Even after its strong performance in 2024 (+22%), silver, the precious-industrial hybrid, is expected to collect the laurels in 2025 as the market’s tightening fundamentals and strong future prospects, which have already enticed investors, continue to capture the imagination, partly on the back of the continued long-term prospects for the solar industry – although policies of the new Administration in the United States may dampen this.”
“Silver investment is expected to remain buoyant and this metal could yet decouple from gold, which is expected to peak this year, while silver marches on, targeting $33 by year-end,” they added.
In the full Outlook, O’Connell and Scott-Gray said that 2024 was the year of transition for the silver supply-demand balance.
“Silver ran a fundamental surplus from 2011 (the first year in which Metals Focus identifies OTC investment) through to 2023 inclusive,” they wrote. “This amounted to just over 78,000t, equivalent to 2.6 times 2024 industrial demand. Investors, however, were more than up to the task of absorbing this metal, with OTC investment of just shy of 100,000t and ETPs, almost 12,000t. From late 2024, however, the fundamental balance moves into a deficit that will expand substantially over the next few years on the back of solar, AI, and transport electrification, underpinning an increasing run-down in inventory.”
The authors noted that silver has always been seen as a precious metal because of its history as currency and its use in jewelry. “The relationship with gold has therefore always been a key to silver’s price performance, but in truth it is more complex than that,” they said. “For much of the past year it has felt as if silver was behaving like a precious metal on the way up, and a base metal on the way down. Statistical analysis bears this out […] During US recessionary periods silver’s price performance, and correlations, with gold and with copper have shown that the majority of the time it has traded much more in line with copper [than] with gold. In inflationary periods, the reverse has been the case.”
StoneX believes there are two main reasons for this. “[O]ne is that the nature of silver’s supply (largely by-product of base metals or from industrial scrap) it does not have a market-clearing price; and the other is because of the small army of investors that think of silver as an accessible method of having exposure to [gold] price movements,” they said. “Add to this the fact that during the period when silver was on the gold standard, private individuals were not allowed to hold gold as an investment, so they turned to silver. This has led to a degree of price volatility such that when gold moves with conviction, silver will move by at least twice as much. This encourages investors and speculators to gear up on gold positions by taking sliver - and often doing it first.”
This year, however, the authors believe silver is in a position to chart its own course, and the solar industry is the reason why.
“Silver is an integral part of solar cells and while, as an expensive component, it is liable to be subject to thrifting, it is highly unlikely that it can be substituted,” they wrote. “Indeed, the latest generation of PV cells carry a heavier loading than previously. Metals Focus estimates that solar absorbed almost 6,019t of silver in 2023; based on estimates from the International Energy Agency for future power generation, we could be looking at growth rates of 16% per annum through to 2027.”
The other burgeoning tech subsector is AI, and this industry is also silver-heavy “in that it will be necessary in the support structure to run AI programs, as well as power-carrying infrastructure,” they said.
“With the markets’ appetite for silver already rekindled by the invigoration of the gold and silver markets in 2024, investors are likely to remain loyal to this metal,” they noted. “We must warn, though, that silver is notorious for its volatile nature and it can be subject to rumour and nervousness.”
“The suggestion by President-elect Trump that Mexico and Canada could be subject to tariffs was enough to spook the market, even though it is likely that these are negotiation stances rather than being cast in stone,” they pointed out. “Mexico is responsible for ~25% of the US’ imports of silver and Canada, 10%. The mere floating of the idea was enough to blow out the EFP to 40 cents – but, as is so often the case with silver, the move was short-lived. This metal is one of the most vulnerable to “knee-jerk” reactions and should always be treated with care.
Silver “will continue to react to any strong activity in gold, while also due for further transition this year as the pre-investment fundamental deficit continues to develop,” they summarized. “Possible continued drag from stagnant Europe and any over-supply of solar cells, but a bright long-term future is likely to continue to attract investment and speculative funds.”
After ending 2024 at $29 per ounce, StoneX projects silver prices to average $32 this year before rising to $33 by year-end, for an annual gain of 14.1%.
Source: https://www.kitco.com/