Silver has both industrial and investment applications, meaning that silver demand comes from a variety of different places.
Silver is known as the most versatile of the precious metals, as it has unique properties and is used in many applications, from everyday silverware to medicine.
Industrial and technological uses for physical silver account for well over half of annual demand, spurred by the metal’s strength, malleability and ductility.
In 2018, global physical silver demand increased around 4 percent from 2017. Despite another drop in the consumption of silver bullion coins and silver bars, 2018 showed greater consumption in the form of silverware and jewelry as well as through the sector, according to the Silver Institute’s yearly supply and demand report.
Moving forward, increased demand of the silver market is expected to come from the solar energy sector, since the precious metal is a great conductor of both heat and electricity, making it perfect for use in solar panels.
Here’s a look at four factors driving silver demand that market participants should consider when they invest in silver, according to the Silver Institute report.
1. Industrial Fabrication
Demand in 2018: 578.6 million ounces
Silver is the best electrical and thermal conductor of all the metals, and so its supply is used in many electrical applications, particularly in conductors, switches, contacts and fuses.
In electronics, industrial silver is used mainly in multi-layer ceramic capacitors, in the manufacturing of membrane switches, in silvered film, in electrically heated automobile windshields, in conductive adhesives and in the preparation of thick-film pastes. In 2018, demand from industrial applications decreased 1 percent from the previous year, but remained a huge driver of the white metal.
Aside from electronics, has been used by many other industrial applications. Solar panels, the automotive industry and brazing and soldering are the main industries in which demand for silver is currently increasing. Here’s a brief rundown of those three categories:
Solar panels — The use of silver in the fabrication of photovoltaic cells, more commonly known as solar panels or solar cells for solar power, is seen as an area of rapid growth in the short to medium term. The Solar Energy Industries Association expects that the US will have more than 100 GW of solar power installed by 2021.
Using silver as conductive ink, photovoltaic cells transform sunlight into electricity. In 2017, photovoltaic demand for silver rose 19 percent, and, although it declined slightly in 2018, it still reached 80.5 million ounces that year.
Automotive industry — Last year, mining companies unearthed around 36 million ounces of silver were used in automobiles. Every electrical action in a modern car is activated with silver-coated contacts. Basic functions such as starting the engine, opening power windows, adjusting power seats and closing a power trunk are all activated using a silver membrane switch.
Brazing and soldering — Adding silver to the process of soldering or brazing helps produce smooth, leak-tight and corrosion-resistant joints when combining metal parts. In addition, silver-brazing alloys are used widely in everything from air conditioning and refrigeration to electric power distribution.
Demand in 2018: 212.5 million ounces
Jewelry is often what most people think about when they consider silver demand. And for good reason — when it comes to jewelry, few materials are better suited for it than silver. Lustrous but resilient, the metal responds well to sculpting, requires minimal care and lasts for a lifetime.
While both silver and gold possess similar working qualities, the white metal enjoys greater reflectivity and can achieve the most brilliant polish of any metal. The vast amount of output from silver mines gets turned into a form of jewelry. In 2018, silver jewelry fabrication increased 4 percent from the previous year, rising up to 212.5 million ounces.
3. Bullion coins and silver bars
Demand in 2018: 181.2 million ounces
Minted silver coins were first used in the Eastern Mediterranean region in 550 BC, and by 269 BC the Roman Empire had adopted silver as part of its standard coinage. Silver was the main circulating currency until the 19th century, when it was gradually phased out of regular coinage.
Even so, silver is still used in some circulating coins, especially in American (the silver eagle coin), Australian, Canadian, Mexican and Austrian bullion coins for investors. Silver consumption in terms of coin fabrication slipped slightly in 2018, shrinking by 4 percent.
Demand in 2018: 61.1 million ounces
Sterling silver has been the standard for silver hollowware and silver flatware since the 14th century. Silver cutlery and other decor lasts for generations as it resists tarnish and is a traditional decoration in homes around the world. Copper is mixed with silver to strengthen it for use as cutlery, bowls and decorative items.
In 2018, silver consumption from the silverware industry jumped up 6 percent from the previous year thanks to a strong recovery in demand from India, which experienced a 10 percent increase to 41.8 million ounces. Additionally, Turkish silverware demand rose by 20 percent to 1.6 million ounces, a rise not seen since 2009.
This is an updated version of an article first published by the Investing News Network in 2017.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.