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 precious metal, 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 global silver demand, spurred by the metal’s strength, malleability and ductility.
In 2019, global physical silver demand increased to 991.8 million ounces from 988.3 million ounces in 2018. Despite another drop in the consumption of silver jewelry and silverware, 2019 showed greater silver consumption in the form of physical investment through silver bars and silver coins, as well as through the photovoltaics sector, as per the Silver Institute’s latest supply and demand report.
Moving forward, increased demand 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 silver investors should consider when they look at the market, according to the Silver Institute.
1. Industrial fabrication
Demand in 2019: 510.9 million ounces
Silver is the best electrical and thermal conductor of all the metals, and so it is used in industrial fabrication, including electrical applications such as 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 2019, demand from industrial applications was nearly unchanged from the previous year, remaining a huge driver of the white metal.
Aside from electronics, silver supply 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. It is expected 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 2019, photovoltaic demand for silver rose to 98.7 million ounces, up from 92.5 million ounces the previous year.
Automotive industry — 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 2019: 201.3 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 silver supply from mine production gets turned into a form of jewelry. In 2019, silver jewelry fabrication increased by 2.2 million ounces from the previous year, rising up to 201.3 million ounces.
3. Bullion coins and silver bars
Demand in 2019: 186.1 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 American silver eagle coin), Australian, Canadian, Mexican and Austrian bullion coins for investors. Silver consumption in terms of coin and bars increased significantly in 2019, jumping by 12 percent.
Demand in 2019: 59.8 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. Base metal copper is mixed with silver to strengthen it for use as cutlery, bowls and decorative items.
In 2019, silver consumption from the silverware industry declined 9 percent from the previous year due mostly to an economic slowdown in India, which saw demand fall by 11 percent.
This is an updated version of an article first published by the Investing News Network in 2017.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.