Silver Price Update: Q3 2024 in Review

Silver reached US$30.14 on August 27 after remarks from Fed Chair Jerome Powell at his annual address at the Jackson Hole Economic Symposium. His dovish statements were the clearest indication yet of an upcoming rate cut.

September started with silver in a slide. It bottomed out on September 6 at US$27.93, but saw a reversal after August's US jobs report fell short of expectations and boosted expectations of a larger rate cut.

This provided tailwinds for silver, which broke through the US$30 level before the Fed slashed rates by 50 basis points at its September meeting. Silver climbed to its quarterly high of US$32.15 on September 24.

Industrial demand still a key silver price driver

Silver is valued as a precious metal, but is also driven by industrial demand, particularly photovoltaics.

According to the Silver Institute, silver demand for solar power has more than doubled in the past five years, rising from 74.9 million ounces in 2019 to a forecast 232 million ounces by the end of this year.

India in particular has become a major factor in global photovoltaics market, and has been one of the largest silver consumers in 2024. The country reportedly imported 4,554 metric tons of silver during the first half of the year, putting it on pace to double the 3,625 metric tons of silver it imported in 2023.

In April, India reintroduced a requirement for major photovoltaics projects in the country to use domestically sourced panels. The requirements were put on hold for the 2023 fiscal year due to insufficient domestic manufacturing. Their return has led to a ramp up in Indian photovoltaics production and an increased need for silver.

Additionally, TopCon cells, which have higher efficiency, but require 50 percent more silver content, have begun to dominate the photovoltaics market, contributing to an increasing strain on the supply of silver.

Speaking to the Investing News Network (INN), Peter Krauth, editor of Silver Stock Investor, noted that in addition to increasing demand from India’s photovoltaics sector, the government has changed import duties.

“One important development was when India decided to reduce import duties on gold and silver from 15 percent to 6 percent. That led to a second surge of imports into that country,” he said.

Overall, the silver market remains in a deficit. The Silver Institute is forecasting that demand from all sectors will rise to 1.22 billion ounces in 2024, while mine supply will reach just over 1 billion ounces.

Given that difference, why hasn’t the silver price seen a bigger run?

Part of the reason is that aboveground reserves are being drawn down. However, Krauth believes market participants are only just realizing that the deficit situation isn’t going away any time soon.

“Supply has been flat for a decade. Mine supply peaked eight years ago. Demand has grown to 20 percent above annual supply since 2020. The main reason prices haven’t exploded is that silver consumers have been able to tap stockpiles of 'secondary inventories' at major futures exchanges and exchange-traded funds," he explained.

"That may have 12 to 18 months before running out."

M&A activity increasing as silver price rises

As the silver price rises higher, M&A activity in the sector is strengthening.

First Majestic Silver (TSX:AG,NYSE:AG) announced on September 5 that it plans to purchase all of the issued and outstanding shares of Gatos Silver (TSX:GATO,NYSE:GATO) in a US$970 million transaction.

The deal will provide First Majestic with a 70 percent stake in the Cerro Los Gatos mine in Northern Mexico. The combined entity's anticipated annual production is 30 million to 32 million silver equivalent ounces.

On October 4, Coeur Mining (NYSE:CDE) agreed to acquire SilverCrest Metals (TSX:SIL,NYSE:SILV) for US$1.7 billion. The deal will create one of the largest silver producers in the world, with output of 21 million ounces projected by 2025.

The deal gives Coeur 100 percent ownership of the recently opened Las Chispas mine in Sonora, Mexico, which is projected to sell 9.8 million to 10.2 million silver equivalent ounces this year.

Krauth said M&A involving smaller companies may follow as the silver price moves higher.

“Current silver prices are positive for profits, but replacing reserves is a big challenge. I think silver crossing the US$35 mark and sustaining it will give miners confidence that high silver prices are here to stay. With that, they are likely to start moving down the food chain to developers and explorers,” he said.